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An improvement in South Africa’s key fiscal metrics prompted by a change in the way statistics authorities calculate gross domestic product could brighten the outlook for the junk-rated nation’s debt assessments.
South Africa's economy is 11% bigger than previously estimated, Statistics South Africa’s updated estimates released Wednesday show.
The revision augurs well for the country’s debt-to-GDP ratio and has “positive implications for South Africa’s sovereign ratings and outlook,” said Nema Ramkhelawan-Bhana, the head of research at Rand Merchant Bank.
South Africa’s debt assessments are at the lowest levels since it first obtained credit ratings 27 years ago. Companies, including Fitch Ratings, have flagged the continued rise in government debt as a key risk to the country’s ratings outlook.
The data revision means debt as a proportion of GDP will now remain below 80% through 2023-24, said Annabel Bishop, chief economist at Investec Bank.
The government projected in February that the ratio would breach the 80% mark in the year through March 2021, and reach 87.3% of GDP in the 2024 fiscal year.
“This will be pleasing to the rating agencies, but still shows rising debt as opposed to stabilisation, and also assumes no additional borrowing,” she said.
