Ratings agency Moody’s Investors Service has placed the government of South Africa’s Baa2 bond and issuer ratings on review for downgrade.

South Africa’s weak economic performance has been cited as a risk factor when assigning a negative outlook to the rating in December 2015.

“We noted then that the economy was vulnerable to further adverse global, regional, domestic and financial market dynamics, with concomitant negative implications for government revenues, the fiscal balance and the government’s debt burden. Last year’s growth dropped to 1.3 percent, the slowest pace since the 2009 global financial crisis,” said the ratings agency.

South Africa’s (P)Baa2/(P)P-2 shelf and MTN program ratings were also placed on review for downgrade, the ratings agency revealed in a statement.

Moody’s anticipates growth to decline still further, to 0.5 percent in 2016, as a consequence of the intensification of this year’s drought, low commodity prices as well as the volatility in global and domestic financial markets since December, resulting in a further steep depreciation of the exchange rate and widening bond yields.

“The drought has necessitated imports of key grain crops and pushed up food prices and overall inflation rates, leading to interest rate rises which have further undermined growth. This has also led the government to reallocate spending from other areas to provide drought relief,” added Moody’s.

Africa’s second largest economy’s downgrade review has been informed by the continuing rise in risks to the country’s medium-term economic prospects and to its fiscal strength, notwithstanding the tighter fiscal stance undertaken in the 2016/17 budget.

South Africa’s worsening debt dynamic was also another factor when assigning a negative outlook to the rating in December 2015.

“As with growth, the debt position has continued to deteriorate, even if only slightly. Despite the government’s adherence to expenditure ceilings in recent years, adverse growth and revenue dynamics have resulted in debt to GDP (excluding guarantees) increasing to 50% of GDP this fiscal year from a trough of 26.5% in March 2009,” read part of the statement.

“The review will allow Moody’s to assess to what extent government policy can stabilize the economy and restore fiscal strength in the face of heightened domestic and international market volatility,” said Moody’s in a statement.

In a related rating action, Moody’s has also placed on review for downgrade the Baa2 rating of the ZAR Sovereign Capital Fund Propriety Limited, which is fully and unconditionally guaranteed by the Republic of South Africa.

The first driver for the review is to allow Moody’s to assess to the likelihood that the decline in South Africa’s economic strength will be reversed over the medium term.