Budget unlikely to result in credit ratings downgrades in next cycle - economist

JOHANNESBURG - Credit ratings agencies are expected to turn their focus to South Africa on Wednesday when Finance Minister Enoch Godongwana tables his highly anticipated budget speech.

Godongwana is expected to detail fiscal proposals to rein in government’s runaway spending and supplement lower-than-expected revenue collection.

The budget is also expected to manage government’s debt, which poses a risk to the country’s credit rating by agencies.

The country’s long-term foreign currency rating is constrained by low GDP growth, a high level of inequality, and the country’s ballooning debt.

Government debt is forecast to surpass 80% of GDP by next year, up from the current estimated 76%.

Though the next sovereign rating won’t be for some time, ratings agencies Fitch, S&P, as well as Moody’s, are expected to keep an eye on SA’s growth forecasts and other key projections.

Chief economist at Investec, Annabel Bishop, said she doesn’t believe the upcoming budget will result in downgrades in the next cycle.

"I think the credit ratings agencies feel that where the projections are now are roughly appropriate for our credit ratings. In other words, the commentary since the MTBPS [Medium Term Budget Policy Statement] to date has really indicated from our key credit ratings agencies that they aren’t likely to downgrade us. It doesn’t mean that they won’t downgrade us if we did get a big revision of finance figures but then again, we aren’t expecting that.”

In January’s rating, Fitch kept SA at BB minus, with a stable outlook, in line with S&P’s rating.