'S&P Global Ratings says South Africa is riskier than we were in 1994!'
Talk about kicking someone when they’re down…
On Wednesday, S&P Global Ratings downgraded South Africa’s credit rating – already at “junk” – to “BB-”, citing “significant adverse implications of the coronavirus pandemic on the country’s already weak economy”.
S&P acknowledges South Africa’s early success in containing the outbreak but warned that "the COVID-19 health crisis will create additional and even more substantial headwinds to GDP growth."
The rating agency forecasts a contraction of 4.5% for the year.
It previously expected growth of 1.6%.
South Africa’s government bonds will exit the World Government Bond Index on Friday, a move that was inevitable even before this latest downgrade.
The Money Show’s Bruce Whitfield interviewed Kevin Lings, Chief Economist at Stanlib Asset Management.
It’s a sad statement. The situation is dire… We’re at a credit rating level lower than in 1994. They’re saying South Africa is riskier than we were in 1994!Kevin Lings, Chief Economist - Stanlib Asset Management
We’re going to struggle to attract the same amount of foreign investment… We’re going to have to pay foreigners a higher interest, costing the government more to borrow…Kevin Lings, Chief Economist - Stanlib Asset Management
Interest is the fastest rising cost in the budget… a debt trap… If the Government pays more to borrow – everybody ends up paying more…Kevin Lings, Chief Economist - Stanlib Asset Management
The government will under-collect by R70 billion or R80 billion… a very significant revenue shortfall… The February budget is null and void… The Minister will have to craft another one…Kevin Lings, Chief Economist - Stanlib Asset Management
We could do more to encourage activity without taking a [Covid-19] health risk…Kevin Lings, Chief Economist - Stanlib Asset Management
Listen to the interview in the audio below.
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