CAPE TOWN – Moody’s will likely downgrade South Africa’s sovereign credit rating to below investment grade, Alexander Forbes chief economist Isaah Mhlanga said on Tuesday.
“We believe Moody’s will follow through with a credit rating downgrade to sub-investment grade in 2020 as economic growth is projected to remain very low, simultaneous with slow economic reform implementation,” Mhlanga said.
He said Moody’s decision last week to revise its outlook on the rating from stable to negative prompted “a marginal sell-off in both the rand and bond markets” but he did not believe that there would be a sustained sell-off as the decision had already largely been priced in by the markets.
Mhlanga said though Finance Minister Tito Mboweni promised to make difficult choices to rein in debt levels, he did not believe that these would suffice.
Moreover, Moody’s on Friday said it believed the government lacked the political capital required to implement decisions that could bring fiscal consolidation and better growth.