Treasury hails 'stable' outlook in Fitch rating

Fin24 – 16 December 2021

• National Treasury said the latest rating of South Africa by Fitch signaled a better-than-expected performance from the economy.
• Fitch's affirmed South Africa's long term foreign and local currency debt ratings at BB-, revising the outlook from negative to stable. 
• National Treasury said while the pandemic continued to serve as a headwind for South Africa, it was unlikely to sink long-term creditworthiness.

National Treasury said the latest rating of South Africa from sovereign credit rating agency Fitch signaled a better-than-expected performance from the economy as the country continued its recovery from the ongoing Covid-19 pandemic.

Fitch's affirmed South Africa's long term foreign and local currency debt ratings at BB-, revising the outlook from negative to stable.

Statistics South Africa announced in early September that the South African economy grew by 1.2% in the second quarter of 2021, which was a 19.3% increase from the same period in the previous year, when the country was in a hard national lockdown aimed at curbing the spread of Covid-19.

In its rating Fitch also noted a "surprisingly strong fiscal performance" for the year with improvements in key fiscal indicators following the rebasing of its national accounts. A National Treasury statement released on Thursday said while the pandemic continued to serve as a headwind for South Africa, it was unlikely to sink long-term creditworthiness.

"The agency warns that the pandemic continues to weigh on economic performance and remains a source of downside risk for public finances.

"However, the likelihood of severe negative effects on creditworthiness has declined over the last year despite the recent emergence of the omicron variant of Covid-19 and the associated rapid surge in new cases in South Africa," said the statement.

The Treasury statement said government would continue to demonstrate its commitment to fiscal sustainability and "enable long-term growth by narrowing the budget deficit and sizable debt", in line with Minister of Finance Enoch Godongwana's medium-term budget policy statement (MTBPS) in November.

"As stated in the MTBPS, government will use part of the higher tax revenues associated with the recent commodity price surge to narrow the deficit, while increasing non-interest expenditure to support key spending priorities," the statement said.

The statement said government would continue to prioritise faster structural reforms, unlock private sector investment and introduce interventions aimed at driving economic growth and job creation.

www.samigration.com