S&P keeps SA's credit ratings unchanged at non-investment grade

Rating agency Standard & Poor's on Friday evening kept SA's sovereign credit ratings unchanged at non-investment grade.

S&P affirmed SA's long-term local currency debt at BB+, the first notch of sub-investment grade. It kept the country's long-term foreign currency rating at BB, two notches below investment grade.

The outlook is stable.

"The stable outlook reflects our view that the South African government will pursue a range of economic, social, and fiscal reforms, albeit over an  extended period of time. According to our projections, from 2019, economic 
growth will pick up modestly, helping to contain the rise in government debt," it said in a media statement. 

The decision to keep the ratings unchanged was broadly expected by analysts. Elena Ilkova, credit and fixed income analyst from RMB Global Markets Research, earlier this week told Fin24 that S&P would likely wait for the National budget in February to provide more clarity on SA's fiscal position before deciding to change its rating.

S&P said it expected real economic growth of 0.8% in 2018. This is slightly more optimistic than the SA Reserve Bank, which is forecasting growth of just 0.6%. 

"However, we anticipate that the  implementation of reforms, including the recently announced fiscally neutral 
growth package, will boost investor confidence, investment, and growth. As such, we expect the economy to recover from this year's low and average  slightly above 2% over 2019-2021.

"Nevertheless, this is close to 0% on a per capita basis, and we estimate that among the 20 major emerging markets, only Qatar, Argentina, and Venezuela will show slower per capita growth." 

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