Moody’s has placed South Africa on a downgrade review.
Do we know what will happen if they decide to downgrade our credit rating to “junk”?
We can learn from Brazil where exactly that happened.
The Money Show’s Bruce Whitfield interviewed Dr. Lyal White, Director at the Centre for Dynamic Markets at the Gordon Institute of Business Science.
White discussed the step-by-step consequences Brazil experienced after its downgrade.
Scroll down for quotes from the audio below.
Brazil has experienced these downgrades frequently in the past.— Dr Lyal White
A downgrade will see our currency and stock market tumbling, just as it happened in Brazil.— Dr Lyal White
A downgrade will increase the cost of capital. Everything will, typically, get more expensive.— Dr Lyal White
Our debt has increased dramatically in the past few years. A downgrade will cause the servicing of this debt to be more expensive.— Dr Lyal White
The Finance Ministry has to send a message to the ratings agencies that we will change course.— Dr Lyal White
A few years ago Brazil had full employment. Now we’re seeing an increase in unemployment.— Dr Lyal White
The biggest impact in Brazil was political. The Brazilian president is now fighting off impeachment.— Dr Lyal White
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