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UPDATE 1-Fitch downgrades South Africa to 'BBB'; outlook sta
Macroeconomic News
UPDATE 1-Fitch downgrades South Africa to 'BBB'; outlook stable
Thu, 10th Jan 2013 18:06
NEW YORK, Jan 10 (Reuters) - Fitch Ratings on Thursday cut South Africa's sovereign credit rat
The decision by Fitch comes in the wake of similar moves by rival agencies Moody's Investors Service and Standard & Poor's last year.
'Economic growth performance and prospects have deteriorated, affecting the public finances and exacerbating social and political tensions,' Fitch said in a statement.
Fitch has a stable outlook on the credit. In October, S&P cut South Africa's credit rating by one notch to BBB with a negative outlook. At the time S&P cited concerns that mining strikes and social tensions could pressure the government to increase social spending, reducing already tight fiscal space and hurting growth.
In September, Moody's cut the rating to A3, which is still two notches above its rivals, citing worries about labor unrest and political instability in Africa's largest economy.
Economic growth and investor sentiment were hit by four months of wildcat strikes in the mining sector, which resulted in about 50 people dead.
Finance Minister Pravin Gordhan said during his October budget presentation the strikes had cost the economy $1.1 billion.
Economic growth fell to 1.2 percent in the third quarter from 3.4 percent in the prior quarter. The effects of the strikes is expected to filter through to fourth quarter growth.
'Weak growth reflects structural rigidities, declining competitiveness, policy uncertainty and labor unrest,' Fitch said.
On the positive side, Fitch cites the generally sound banking system, a deep local bond market, long maturities on debt, floating exchange rate and inflation-targeting regime as an effective shock absorber.
(Reporting By Daniel Bases and Caryn Trokie; Additional reporting by Xola Potelwa in Johannesburg; Editing by Chizu Nomiyama and Grant McCool) Keywords: SOUTHAFRICA FITCH/DOWNGRADE
(daniel.bases@thomsonreuters.com)(+1 646 223 6131)(Reuters Messaging: daniel.bases.reuters.com@reuters.net)
COPYRIGHT
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
ing to BBB from BBB-plus, citing rising social and political tensions and the inability of the government to implement effective reforms.
The decision by Fitch comes in the wake of similar moves by rival agencies Moody's Investors Service and Standard & Poor's last year.
'Economic growth performance and prospects have deteriorated, affecting the public finances and exacerbating social and political tensions,' Fitch said in a statement.
Fitch has a stable outlook on the credit. In October, S&P cut South Africa's credit rating by one notch to BBB with a negative outlook. At the time S&P cited concerns that mining strikes and social tensions could pressure the government to increase social spending, reducing already tight fiscal space and hurting growth.
In September, Moody's cut the rating to A3, which is still two notches above its rivals, citing worries about labor unrest and political instability in Africa's largest economy.
Economic growth and investor sentiment were hit by four months of wildcat strikes in the mining sector, which resulted in about 50 people dead.
Finance Minister Pravin Gordhan said during his October budget presentation the strikes had cost the economy $1.1 billion.
Economic growth fell to 1.2 percent in the third quarter from 3.4 percent in the prior quarter. The effects of the strikes is expected to filter through to fourth quarter growth.
'Weak growth reflects structural rigidities, declining competitiveness, policy uncertainty and labor unrest,' Fitch said.
On the positive side, Fitch cites the generally sound banking system, a deep local bond market, long maturities on debt, floating exchange rate and inflation-targeting regime as an effective shock absorber.
(Reporting By Daniel Bases and Caryn Trokie; Additional reporting by Xola Potelwa in Johannesburg; Editing by Chizu Nomiyama and Grant McCool) Keywords: SOUTHAFRICA FITCH/DOWNGRADE
(daniel.bases@thomsonreuters.com)(+1 646 223 6131)(Reuters Messaging: daniel.bases.reuters.com@reuters.net)
COPYRIGHT
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
