JOHANNESBURG (Reuters) – Moody’s stable outlook on South Africa’s credit rating means there is little chance of a downgrade this year, the ratings agency said on Thursday, but warned that a commitment to fiscal consolidation would be key to maintaining its rating.

The agency, the last of the top three ratings firms to have Pretoria’s long-term foreign-currency debt in investment grade, however said a recovery in South Africa’s economic growth will be slow and less than the Treasury’s estimate of 1.5 percent for 2018 after a surprise contraction in the first two quarters.

South Africa entered recession for the first time since 2009, data showed last week, undermining President Cyril Ramaphosa’s efforts to revive the economy after years of stagnation under former president Jacob Zuma.

Lucie Villa, Moody’s lead analyst for South Africa, said the rising share of government revenue that South Africa spends on debt servicing was a concern for Moody’s, but that she expected some fiscal adjustment in the October budget statement.

“Growth is going to be below 1 percent, to what extent it’s difficult to say,” Villa told the agency’s annual Sub-Saharan Africa conference, referring to this calendar year.

“South Africa has a stable outlook, … there is little chance of a rating action,” Villa said, in response to a question about whether Moody’s would downgrade the country’s sovereign rating at a review scheduled for next month.

Moody’s has previously said the slide into recession would exacerbate fiscal and monetary challenges. It said weaker-than-expected economic data was “credit negative”.

Villa said two ratings strengths for South Africa was that its government debt had a long maturity and that relatively little of the debt was foreign-currency denominated.

“It’s very important what announcement will be made (at the October budget statement), … what we think is going to be critical is the wage bill, tax revenues,” she said.

Villa said plans by the ruling African National Congress (ANC) to nationalise the Reserve Bank were not “rating-relevant,” assuming that the bank’s mandate would not be affected.

The central bank has said any change of ownership would not affect its mandate or independence.

Africa’s most developed economy needs faster economic growth if it is to reduce high unemployment – currently at 27 percent – and alleviate poverty, analysts say.

Unemployment is a hot-button issue ahead of national elections in 2019, and the ANC has made repeated pledges that things will improve.

($1 = 14.8287 rand)

Writing by James Macharia