Johannesburg - Fitch Ratings said South Africa’s economic growth trend is still consistent with its stable outlook on the nation’s credit rating.
South Africa, Ghana and Zambia, which were downgraded by Fitch this year “are still tending to weaken, even though Fitch judges current trends to be consistent with stable outlooks,” Fitch directors Richard Fox and Carmen Altenkirch said in a report on sub-Saharan Africa today.
In January, Fitch was the last of three rating companies to downgrade South Africa’s debt, lowering it to BBB, the second-lowest investment-grade level. It changed the outlook on the rating to stable from negative at the time, while Standard & Poors and Moody’s Investors Service have the rating on a negative watch.
South Africa’s government is forecasting economic expansion of 2.1 percent this year, which would be the slowest pace since a 2009 recession, as strikes at mines and factories and sluggish global demand cut exports.
Slower growth in Africa’s biggest economy has “negative implications for debt dynamics,” Fitch said.
“Structural reforms that might invigorate growth are unlikely before the 2014 elections.”
The biggest external risk for growth in sub-Saharan Africa is plans by the US Federal Reserve to curb its monetary stimulus program that’s helped to support global demand, according to Fitch.
An improvement in South Africa’s economic outlook next year may be derailed if “risk appetite for South African assets were to decline substantially,” it said.
The rand has slumped 18 percent against the dollar this year, the worst of 16 major currencies tracked by Bloomberg.
It gained 0.6 percent to 10.3302 per dollar as of 2:51 p.m. in Johannesburg. - Bloomberg News