Johannesburg - South Africa's government defended its economic policies on Saturday after credit ratings agencies cited the country's low GDP growth and budget and current account deficits as weaknesses.
“Important structural reforms are underway in major economic sectors that will boost the economy's growth,” the national treasury said in a statement in response to the ratings reviews.
Ratings agency Fitch maintained South Africa's BBB rating, two notches above junk status, in a review on Friday, but kept its negative outlook and cut its GDP growth forecast for 2014 to 1.5 percent, from 1.7 percent, due to strikes and electricity supply disruptions. It also lowered its growth estimate for 2015 to 2.5 percent, from 3 percent.
Standard & Poor's, in its review of Africa's most advanced economy on Friday, kept its rating at BBB-, the lowest investment level, with a stable outlook.
In October, the South African treasury set out a five-year economic framework that pledged tax rises, a freeze on new jobs in the public sector and ensuring that financial support for state firms would not widen the budget deficit, which is forecast at 4.1 percent of GDP for 2014/15.
“The framework also recognises the need to support job creation through sector-based interventions, employment incentives, the expanded public works programme and the Jobs Fund,” the treasury said in its statement.
South Africa's current account deficit, which is running at 6 percent of GDP, has been a major source of concern for investors, putting pressure on the rand currency.
Moody's downgraded South Africa last month citing poor prospects for medium-term economic growth and rising public debt. - Reuters