SA’s risk adds to interest rates pressure, Reserve Bank says
JOHANNESBURG – South Africa’s rising country risk is putting upward pressure on interest rates, even as inflation expectations are dropping, with credit-rating companies contributing to the negative sentiment, according to the Reserve Bank.
Moody’s Investors Service cut its 2020 economic growth forecast for South Africa to 0.7% from 1% on Monday and said the country’s relatively high real interest rates are constraining expansion. The ratings company is the only major one that still considers South Africa’s debt investment grade and after it changed its outlook to negative in November, that assessment is at risk.
Credit-rating companies are contributing to a view in financial markets that South Africa is riskier than in the past, Chris Loewald, a member of the bank’s Monetary Policy Committee and head of economic policy development and research at the Reserve Bank, told lawmakers in Cape Town on Tuesday. Based on credit-default swaps, markets are already pricing in South Africa as below investment grade.
Source: iol.co.za