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South Africa rating remains under pressure -Moody’s

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President Zuma

South Africa’s credit rating remains under pressure due to economic weakness, yet that does not necessarily mean the country faces an immediate downgrade, rating agency Moody’s said on Wednesday.
Moody’s rates South Africa’s debt at “Baa1”, two notches above speculative investment grade, and since 2011 has given the continent’s most advanced economy a “negative outlook”.
“All of the factors are being pressured. We have economic strength deteriorating because the economy just can’t quite recover from the recession, even though the recession was very mild here,” analyst Kristin Lindow told a conference in Johannesburg.
“There are various risks that are arguably worsening … but that doesn’t necessarily mean the rating will be downgraded.”
The rating agency, which is likely to make its next rating decision later this year, expects South Africa to grow at a sluggish 2.2 percent this year and not above 3 percent in 2015.
“I’m less pessimistic than some are about the economy’s ability to respond to the pick-up in growth in Europe. I think that’s going to be a game-changer for South Africa once the strikes hopefully come to an end,” Lindow said.
South Africa’s platinum mines have been hit by a four-month work stoppage that has cut 40 percent of global output and dampened South Africa’s growth prospects, a strike that Moody’s says is credit negative.
Workers were starting to return to work on Wednesday, but the effects of the strike are likely to be long-lasting.
“It creates problems in terms of South Africa as an investment destination. Investors have questions about whether it makes sense to locate their operations in South Africa.”

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