Picture: ISTOCK
Picture: ISTOCK

Adding to SA’s economic woes, credit ratings agency Moody’s has halved its growth forecast for SA, from 1.5% to between 0.7% and 1% in 2018.

This comes after data released on Tuesday confirmed that SA has entered a recession for the first time since the financial crisis.

Moody’s expects growth to accelerate to 1.5% in 2019.

The data from Statistics SA came as a shock to the market. SA’s economy contracted 0.7% in the three months to the end of June, following a dismal performance in the first quarter: a contraction of 2.6% revised from 2.2%

Analysts warned that this would attract the attention of credit rating agencies once again.

"This weaker-than-expected economic performance will exacerbate fiscal and monetary challenges, a credit negative," Moody’s said in a statement on Thursday.

This weaker-than-expected economic performance adds to the fiscal and monetary policy challenges posed by the 20% depreciation of the rand against the US dollar so far in 2018.

Moody’s had already warned prior to the recession that it expected that the government would miss its fiscal targets for the year owing to a low tax performance, the public-sector wage bill and higher-than-budgeted interest payments

It added that slower growth would further challenge the task of the Treasury.

At the end of March, Moody’s affirmed SA’s investment-grade credit rating and revised its credit outlook to stable from negative, saying the previous weakening of national institutions was gradually reversing, which supported an economic recovery. Its next review was expected on October 12, ahead of the medium-term budget policy statement at the end of October.

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