Picture: SUPPLIED
Picture: SUPPLIED

SA will "stave off" a sovereign credit rating downgrade to subinvestment grade, or junk status, particularly if the budget on February 24 clearly states how higher economic growth will be achieved and fiscal prudence adhered to, Standard Bank chief economist Goolam Ballim said at a briefing on Tuesday.

A rating downgrade would cause capital outflows, weaken the rand and raise the cost of borrowing for government and local companies that borrow on international markets.

"We are pressed now to act and I have highlighted that February 24 is SA’s date with destiny because should we fail, especially on that date, then a downgrade to subinvestment in June will be a certainty," Mr Ballim said. "However … if we do enough in February to avert the downgrade in June, it signals that an inflection point has been reached and a new course is being charted."

Standard & Poor’s rates SA one level above sub investment grade at BBB-. The negative outlook attached to the rating implies that a downgrade to subinvestment grade is possible if economic growth does not improve and budget deficits remain large, among others.

The bank forecasts the economy to grow 0.8% this year — almost in line with the Reserve Bank’s 0.9% estimate — and 1.7% next year. This growth would be supported by exports, and government and household spending.

SA needed an economic growth path beyond "rhetorical reference" to programmes such as the National Development Plan, Mr Ballim said.

Finance Minister Pravin Gordhan may announce tax hikes in his budget, as he would need an average of R30bn in revenue each year for the next three years to close the budget deficit, according to Mr Ballim.

The bank forecasts more interest rate hikes this year as the Reserve Bank tries to fight rising inflation.