Lucie Villa, vice president at Moody’s, said the rating agency’s baseline scenario estimated that the debt-to-GDP ratio was projected to reach 65 percent of GDP by 2023.
However, Villa said risks to the debt trajectory stemmed from potentially larger state-owned entities (SOE) support packages than currently planned by the government as well as slower growth and higher interest rates.
“To illustrate these risks, we present a “weaker” scenario where debt would increase to 68 percent of GDP by 2023, versus 65 percent under our baseline. Under a more severe scenario based on Moody’s standardised shocks, debt would rise to 70 percent by 2023,” Villa said.
“South Africa’s credit profile would face downward pressure if we expect that government debt and contingent liabilities risk from SOEs will continue rising to levels no longer consistent with a Baa3 rating, or that medium-term growth will persist at very low levels as recorded in 2018.”