South Africa’s credit rating is unlikely to change at another review in June or in the next 24 months, but an electricity crunch will shave 0.3 per cent off this year’s economic growth, Standard & Poor’s said.
In its macroeconomic outlook for Africa’s most advanced economy on Monday, S&P forecast growth of over 2 per cent this year, which would accelerate in 2016 and beyond.
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But it warned that wage demands from the public sector, which are well above the inflation rate, and funding the cash-strapped power utility Eskom were a risk to growth.
In December, S&P kept South Africa’s rating at ‘BBB-‘, the lowest investment grade, with a stable outlook.
The agency is due to issue its next review in June.
“Our outlook doesn’t mean rating measures could not be taken earlier. Outlooks can be moved and ratings can ultimately change,” Christian Esters, senior director sovereign ratings, told reporters.
Peer Fitch rates South Africa at BBB with a negative outlook, and warned last week that a downgrade was more likely than not.
Moody’s cut its rating to ‘Baa2’ from ‘Baa1’ in November last year, citing a weak growth outlook caused by structural weaknesses including energy shortages.
Power firm Eskom has struggled to meet electricity demand because of a lack to funds to upgrade its ageing infrastructure, forcing it to implement controlled power outages to prevent the grid from being overwhelmed in the worst power crisis since 2008.