Moody’s has altered South Africa’s outlook from “negative” to “stable,” noting the government’s capacity to control its debt burden over the medium term as a rationale for the shift.
Even before the COVID-19 outbreak, South Africa’s government finances were in bad shape, and they took a further hit in 2020 when government revenues were impacted by an economic slowdown.
Since then, the fiscal position has improved due to better commodity export prices in South Africa.
“South Africa’s budgetary situation has noticeably recovered from the outbreak, thanks to the government’s fiscal austerity measures and beneficial external developments,” the ratings agency said in a statement.
“As a result, the government’s debt-to-GDP ratio is now forecast to stabilize around 80% over the medium term,” says the report.
The agency said it is maintaining South Africa’s ‘Ba2’ rating, citing the country’s stable financial system as a rationale, as well as the country’s low risk and huge pool of domestic investors for government borrowing.
South Africa recently held an investment summit. This certainly attracted more foreign direct investments into the nation. A reality that shows many investors still have confidence in the country despite the backlash from last year’s riot in Durban.