The best that can be said about the ratings reviews, released on Friday evening, was that there was no fresh downgrade. Both agencies affirmed South Africa’s sovereign credit rating at BB-, three notches below the coveted investment grade status it once had.
What would an upgrade require? Well, for one thing, it will require significantly faster economic growth, and South Africa just cannot seem to gain traction on this treadmill.if economic growth is sustainably higher than we currently expect over multiple years, For the record, S&P expects South Africa’s GDP – which contracted 7% in 2020 – to grow 3.6% this year and 2.5% in 2022. Faster growth than these forecasts, which will still leave the economy below pre-pandemic levels of output, will be needed to trigger an upgrade. Such a scenario, sadly, does not seem realistic.
Still, it’s not all doom and gloom. Fitch noted that South Africa’s debt-to-GDP ratio for next year was looking considerably better than its previous forecast.