A scheduled review of South Africa’s sovereign rating by ratings agency Moody’s was postponed late on Friday, leaving the country at Ba2 – two rungs below investment grade – with a negative outlook.
According to Fin24, this means the next step could potentially be another downgrade, but that economists did not expect a further downgrade soon.
The agency published a notice late on Friday to say that the ratings for South Africa – and other countries like Denmark and Italy – were not updated. It did not say when the next review could be expected.
Last year, Moody’s stripped South Africa of its investment grade rating, downgrading government bonds to “junk”. A “junk” rating means there’s a bigger chance that the government won’t be able to pay back its debts.
In February, the agency raised concerns over government spending on civil servant wages and interest payments on its ballooning debt.
Fin24 reports that, while still strained, South Africa’s government finances currently look in better shape than expected. It cited a Bloomberg report of this week which said the budget deficit (R552 billion) for the past year was 11.2% of GDP, far lower than government’s own projections, and thanks to surprisingly strong tax income, as well as subdued state spending.