“We now forecast that it’s probably below 50% [the probability] for an investment grade downgrade by S&P this year,” Johann Els, senior economist at Old Mutual Investment Group says.
He says there were fears that Treasury would deviate from the October medium-term economic framework as it did in previous years (see graphic representation below), but the budget was the closest delivery to the October statement in many years.
There also seems to be a higher probability that Gordhan will remain in his position for a longer time and there have been slight improvements with regards to governance at state-owned enterprises.
S&P Global Ratings has repeatedly stressed that it only needed to see slow and steady improvements, he adds.
“Of course politics can play havoc with all of this, but for now maybe a slightly better chance that we won’t be downgraded.”
While ratings agencies have generally welcomed National Treasury’s commitment to stick to targets, risks remain, with Fitch Ratings’ senior director, Jan Friederich, warning last week that political and social pressures will test the government’s commitment to fiscal consolidation.
“Meanwhile, sustainable consolidation remains reliant on a still-fragile recovery of GDP growth,” he added.
National Treasury expects economic growth to gradually improve from 0.5% in 2016 to 1.3% and 2% in 2017 and 2018 respectively.
Unfortunately South Africa is still marred by a confidence crisis, which is holding back economic growth, Els says.
S&P Global Ratings has repeatedly stressed that it only needed to see slow and steady improvements, he adds.
“Of course politics can play havoc with all of this, but for now maybe a slightly better chance that we won’t be downgraded.”
While ratings agencies have generally welcomed National Treasury’s commitment to stick to targets, risks remain, with Fitch Ratings’ senior director, Jan Friederich, warning last week that political and social pressures will test the government’s commitment to fiscal consolidation.
“Meanwhile, sustainable consolidation remains reliant on a still-fragile recovery of GDP growth,” he added.
National Treasury expects economic growth to gradually improve from 0.5% in 2016 to 1.3% and 2% in 2017 and 2018 respectively.
Unfortunately South Africa is still marred by a confidence crisis, which is holding back economic growth, Els says.
