S&P improves South Africa’s credit rating outlook to positive: here’s why

The South African government welcomed S&P global ratings decision to revise the country’s credit rating outlook to positive from stable.

This announcement comes right after the credit rating agency Moody’s updated its outlook on South Africa from negative to stable last month.

Moody’s explained that South Africa’s fiscal position has recovered significantly from the pandemic thanks to the government’s fiscal consolidation measures and positive external developments, adding that as a result it appears that the government’s debt-to-GDP ratio will stabilize at around 80%. in the medium term.

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S&P said recent favorable trading conditions in South Africa have improved the external and fiscal trajectory.

The country’s reasonably large net international investment position, flexible currency and large domestic capital markets are also providing strong reserves against changes in external financing.

The agency also expects South Africa to post a current account surplus in 2022 for the third consecutive year, as prices of key metals and mining exports have risen significantly since the start of the Russia-Ukraine conflict.

According to the agency, there has also been some improvement in the implementation of the key reform objectives under the terms Operation Vulindlela (established in October 2020 as a joint initiative of the Presidency and the National Treasury to accelerate the implementation of structural reforms) as well as higher-than-expected tax revenues.

In a statement National Treasure said the government is using some of the additional revenue to accelerate debt stabilization, with the majority aimed at meeting urgent social needs, promoting job creation through the presidential employment initiative, and supporting the sector public health.

He also added that faster implementation of economic reforms, accompanied by fiscal consolidation to provide a stable basis for growth, will support a faster recovery and higher levels of long-term economic growth.

* Compiled by Xanet Scheepers.