Finance Minister Enoch Godongwana will this week outline improvements in South Africa’s public finances that pave the way for a sovereign credit-rating outlook upgrade, a Bloomberg survey shows.
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Six of the nine economists canvassed — including those at Bank of America Corp and Morgan Stanley – expect Fitch Ratings to revise its outlook to positive at its next review. Four predict a similar move by Moody’s Ratings. Standard Chartered Plc, which responded after the survey closed, expects both Fitch and Moody’s to shift to a positive outlook.
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An outlook change is long overdue, after S&P Global Ratings in November upgraded the country’s credit rating to BB — two steps below investment grade — with a positive outlook, Razia Khan, Standard Chartered’s chief economist for Africa and the Middle East, said.
“You can’t ignore the positives in South Africa,” Khan said in an interview on Friday. “We’re likely to see confirmation of the fiscal progress and there’s every possibility that revenue will outperform,” buoyed by booming gold and other precious-metal prices, she said.
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When Godongwana delivers his budget at 2 p.m. in Cape Town on Wednesday, he’s expected to announce that the National Treasury will beat its consolidated fiscal deficit forecast of 4.7% of gross domestic product for 2025–26, with economists projecting a shortfall of 4.4%. They also expect the Treasury to meet its target of stabilising debt this fiscal year.
“Sure, they could hang on to the fact that growth has been very slow to turn around, but I’m not sure anyone really has reason to think it’s going to remain persistently weak,” Khan said. Economists in a different poll forecast South Africa’s economy will grow 1.6% this year and 1.3% in 2025, after stagnating for more than a decade.
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Fitch rates South Africa’s long-term foreign-currency debt at BB-, three notches below investment grade, with a stable outlook. Moody’s assesses the sovereign two levels below investment grade, assigning it a Ba2 rating with a stable outlook.
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A positive revision would vindicate the progress South Africa has made in reforms, such as improving its logistics and energy networks, reining in debt, and lowering its inflation target to 3% for the first time since 2000, bringing it in line with its trading partners.
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Other economists, such as BNP Paribas’s Jeffrey Schultz, expect an outlook change only after the Medium Term Budget Policy Statement later this year.
“We are not expecting any credit ratings upgrades or outlook changes in response to this budget,” he said. “Rather we think scope for ratings changes can come after the October MTBPS where we think there will be more tangible evidence of fiscal consolidation.”
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