Chance of a downgrade in June‚ but December more likely – economist
There is a chance of South Africa being downgraded by Standard & Poor’s in June‚ but December is more likely‚ according to Nomura International economist Peter Attard Montalto.This follows the announcement by Moody’s Investor Services on Friday evening that it was maintaining its sovereign rating for the country at Baa2 with a negative outlook‚ which news the National Treasury welcomed as recognition that the government was bringing public finances under control despite recent “adverse political developments”.
Commenting on the Moody’s statement‚ Attard Montalto said: “They see the political shock of Nene gate as a sign of strong institutions‚ they are placing and awful lot of weight on the turn around in growth next year and on debt stabilisation.“They see structural reforms as at very early stage but lack of materialisation here would be reason to downgrade. Similarly if growth doesn’t rebound or if fiscal consolidation slips this would be another reason to downgrade.“We will have to wait see their reaction after local elections (which they mention as a litmus test) and pace of structural reforms in rest of year and Oct MTBPS.”
Attard Montalto pointed out that Moody’s had always been more positive than the other rating agencies – “hanging on the rosy view by its finger nails (they hung on to vein hope of NDP being SA’s deliverance for longer than anyone else)”.“As such this unchanged is not a total surprise‚” he stated.“Next step S&P on June 3. We think there is a chance they downgrade then but there is not very much new data and December is more likely‚” he added.