Moody’s said on Wednesday it expects South Africa to avoid sliding into a recession this year, despite signs that the economy is struggling after contracting in the second quarter this year.
Moody’s Senior Vice President, Kristin Lindow, said in a statement that electricity shortages, low commodity
prices, a drought and weaker than expected global growth will
constrain Africa’s most advanced economy over the next 18 months. However, this was already reflected in the government’s Baa2 rating, stable outlook, she said.
The economy contracted by 1.3 percent on annual basis in the second quarter, data showed last week.
“While Moody’s expects South Africa to avoid recession in 2015, the rating agency forecasts growth of only 1.7 percent in 2015 and 1.9 percent in 2016, with 3 percent growth unlikely before 2017 or 2018 at the earliest,” Moody’s said in the statement.
Moody’s cut the country’s rating to Baa2 from Baa1 in November last year, citing poor prospects for medium-term growth and rising public debt, but changed its outlook to stable from negative.
In May the ratings agency warned that there was a risk of a downgrade if the the government’s commitment to fiscal consolidation and stabilising debt faltered or the investment climate deteriorated further.