Treasury positive about next Moody’s credit rating
The effect of a downgrade depends on how much the market has already factored it into prices, but Eskom may be the deal-breaker
The Treasury is hopeful that Moody’s Investors Service will not downgrade SA’s sovereign credit rating to junk status when it announces its decision at the end of the month. A downgrade to sub-investment grade would automatically mean SA being removed from the Citigroup World Government Bond Index. This would force asset managers to sell SA bonds worth billions of rand. Moody’s was the only major ratings agency not to downgrade SA sovereign debt to junk status in 2017. It is currently rated at Baa3, the lowest investment grade. S&P and Fitch have already downgraded SA to junk status. A Moody’s downgrade would also weigh on growth, with the Treasury factoring in a contraction of 1.2% for 2019, as opposed to a growth forecast of 1.5%, should a downgrade take place, said Duncan Pieterse, acting director-general of economic policy. A further contraction of 0.2% in 2020 is expected in such a scenario, he said. Prolonged and constant load-shedding by Eskom would result in a forecast growt...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.