Chances of credit downgrade fall below 50%
However, political tension and the low-growth trap worry S&P Global Ratings
The likelihood of a credit downgrade to junk status for South Africa by June has diminished to below 50%, although political tension and the low-growth trap worry S&P Global Ratings. Speaking on the sidelines of the S&P credit conference in Johannesburg last Tuesday, S&P associate director Gardner Rusike said that theprobability was a one-in-three chance of a ratings downgrade. But he said the rating could be lowered should the agency not "see improved economic growth [and] if we see that the contingent liabilities are rising". Contingent liabilities are provisions for unexpected future events. The National Treasury's failure to meet fiscal consolidation targets, which include reducing public spending and cutting costs to stabilise debt, would impact the rating adversely. Loss of an investment credit rating is negative for borrowing costs, investment inflows and the currency, and will lead to higher inflation and interest rates. S&P ranks the government's debt one notch above subinv...
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