Standard and Poor’s (S&P) Global Ratings, revised its outlook for South Africa last week, from a stable to positive outlook.

S&P said this is due to improved reform prospects and stronger growth potential.

The country’s foreign currency rating remains at BB-/B, and the local currency rating is BB/B.

The positive outlook is due to the new government’s implementation of key economic reforms under “Operation Vulindlela” and improvements in energy generation.

S&P also praised South Africa’s sizable and sophisticated financial system that provides a deep funding base for the government and the SARB’s proactive monetary policy response that has slowed consumer price increases.

According to S&P’s report, South Africa’s real GDP growth is projected to increase to 1.4% annually between 2025 and 2027, up from 1.0% in 2024 while the gross government debt stands at around 76% of GDP in 2024, which is high but expected to stabilize with ongoing fiscal consolidation efforts.

However, the country’s debt is projected to rise to 80% of GDP by 2027, largely due to increased social spending, State-Owned Enterprise (SOE) bailouts, and wage pressures.

Inflation in South Africa decreased to 3.8% in September 2024 and is expected to remain within the South African Reserve Bank’s target range of 3-6%.
This decline in inflation, along with a 25-bps interest rate cut in September 2024, is aimed at supporting consumer spending and enhancing business confidence.

The ratings agency noted that it could raise the ratings of an improving track record of effective reforms results in structural strengthening of economic growth and reduced government debt and contingent liabilities.

The National Treasury said it welcomes the S&P decision.
“According to the S&P, the positive outlook reflects the agency’s view that increased political stability following the May 2024 general elections and impetus for reform, could boost private investment and GDP growth. S&P further states that since the formation of the new broad coalition of 11 political parties under the Government of National Unity (GNU), debt yields and portfolio inflows have improved, leading to easing financing conditions and currency strengthening.”

Treasury also said Government’s strategy focuses on fiscal sustainability, supporting economic growth and critical social services, and  addressing significant fiscal and economic risks.

Information credit to S&P, Frontline Africa Advisory

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