Picture: REUTERS
Picture: REUTERS

In this edition of Business Day Spotlight, we look at the effects of the recent Moody’s downgrade on the SA economy.

Our host Mudiwa Gavaza is joined on the line by Jacques Nel, head of Africa macro-economic research at NKC African Economics to discuss the fallout of the downgrade and Covid-19 crisis.

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This past week, international ratings agency Moody’s issued a country rating for SA. After being the only ratings agency still holding the country above investment grade, Moody’s finally downgraded SA’s profile given issues such as the budget deficit and problems with state-owned enterprises (SOEs).

Even with the effects of the coronavirus doing much to dampen economic activity in the country, Nel says the downgrade was expected. The sad thing is that the ratings agency had given SA so much time to show signs of change and reform but the country was unable to yield positive results during that time.

The key issue in getting SA out of this mess is to grow the economy, says Nel. The country has not seen consistent high rates of growth for almost a decade, which doesn’t bode well for its prospects.

Nel says his company’s economic growth outlook for SA is now at -4.9% for the year.

The ongoing negative effects of the Covid-19 crisis on the SA economy continue to mount. Nel says the contraction in the local economy is likely be felt by countries in the rest of the region, with the continent as a whole expected to have an economic contraction this year.

The discussion also looks at the effect of global events on the rand, together with the recent US jobs report and its implications for the world economy; and the role that policymakers have to play to get the country on the path to growth.  

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Business Day Spotlight is a MultimediaLIVE production.