Moody's likely to keep SA's credit rating at investment grade post-election - analyst

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The outcome of the election which was in line with market expectation is likely to influence global ratings agency Moody's to keep South Africa's credit assessment unchanged at Baa3 - the last rung of investment grade, according to head of research at FNB Securities.

In March, Moody’s skipped its much-anticipated assessment of South Africa's sovereign credit rating, granting the growth-stunted economy a reprieve. The next date for a possible credit rating is in November.

On Thursday, however, Moody's issued its credit report on SA, saying that while SA's credit profile was "resilient to shocks" that support its current rating, its credit profile was likely to continue to erode.

Chantal Marx from FNB on Monday said a change in Moody's assessment was not expected, but that sentiment was dependent on external factors and changes in domestic growth. 

"If we see further slippage in terms of government finances that would be a really bad thing.  But as things stand now, we think there is a better chance that they will keep their assessment as is," she added.

Moody's currently ranks South Africa at Baa3, the last rung of investment grade, with a stable outlook. Other major ratings agencies, Fitch Ratings and S&P Global already have South Africa's credit rating  at sub-investment.

Marx pointed out that sentiment towards South Africa was positive at the moment, given the outcome of the recent election where the ANC under President Cyril Ramaphosa remained in power.

She stressed that key structural reforms were needed to stimulate growth, both in the medium term and long term.

"Sorting out the state owned enterprises would be a win from a fiscal sustainability perspective. If we could get certainty in finances that would be great from a ratings agency point of view."

Ramaphosa is likely to announce his new cabinet later this month which is widely expected to be reduced considerably. 

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