Moody’s: SA rating pressure doesn’t mean downgrade

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Moodys REUTERS Moodys.

Johannesburg - Moody’s Investors Service said while South Africa’s Baa1 credit rating remains under pressure, that doesn’t mean it will necessarily be downgraded.

The economy is still struggling to recover from recession and the nation’s fiscal strength is weakening, Kristin Lindow, senior vice president at Moody’s, said at a conference in Johannesburg today.

“The economy just can’t quite recover from the recession, even though the recession was very mild here,” she said.

“The indicative rating range of A2 to Baa1 does belie negative pressure, but it does not necessarily mean that the rating will be downgraded.”

Moody’s has kept a negative outlook on South Africa’s credit rating since reducing in September 2012 to the third- lowest investment grade level.

The ratings company said yesterday the decisive election win by the ruling African National Congress on May 7 is positive for the nation’s credit as it signals policy continuity.

Lindow said President Jacob Zuma’s new cabinet will indicate whether “to expect alterations to the fiscal guidelines.”

The ANC will face a much tougher contest in the next election in five year’s time unless it can combat corruption and make faster progress in boosting economic growth and creating jobs, she said.

Moody’s will hold its next review on South Africa’s rating after Zuma appoints his cabinet, Lindow said. - Bloomberg News

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