S&P; not immediately likely to lower SA’s ratings
by Staff Writer,
2016-02-25 17:39:43.0
THE ratings that Standard & Poor’s (S&P) applies to SA have not immediately been affected by Finance Minister Pravin Gordhan’s 2016-17 budget.
The ratings agency said on Thursday that the Treasury’s budget projections were broadly consistent with S&P’s base-case assumptions of planned fiscal consolidation‚ albeit against a sharp downward revision of gross domestic product (GDP) growth in 2016.
"However‚ we note that the budget’s ambitious fiscal consolidation targets for 2017-18 and 2018-19 aim to reduce fiscal deficits at a faster pace than the treasury previously anticipated," said S&P.
"Nevertheless‚ we consider SA’s fiscal consolidation remains vulnerable to lower-than-expected GDP growth and shortfalls in revenues. We also consider that the fiscal trajectory continues to be exposed to contingent liabilities emanating from state-owned entities with weak balance sheets‚ which may require more support than what the government has currently provided‚" the ratings agency said.
Debt-servicing costs were vulnerable to the domestic interest-rate environment and, to a lesser extent, to exchange-rate weakness.
In addition‚ GDP growth rates were still subdued‚ and would likely remain so in the medium term‚ posing a threat to consolidation plans‚ said S&P.
"The announced budget lacks significant policy announcements that we think would immediately spur GDP growth‚ or provide much-needed business confidence to the private sector.
"Efforts in this regard continue to remain limited‚ particularly in labour relations‚ where strikes have, in the past, inhibited higher GDP growth and have the potential to do so this year again in the mining sector‚" the ratings agency said.
"We have determined‚ based solely on the developments described herein‚ that no rating actions are currently warranted. Only a rating committee may determine a rating action and‚ as these developments were not viewed as material to the ratings‚ neither they nor this report were reviewed by a rating committee‚" said S&P.
S&P’s ratings on SA are as follows: Foreign currency BBB+/Negative/A-2; local currency BBB-/Stable/A-2; SA national scale zaAAA/–/zaA-1.
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Standard and Poors. Picture: REUTERS
THE ratings that Standard & Poor’s (S&P) applies to SA have not immediately been affected by Finance Minister Pravin Gordhan’s 2016-17 budget.
The ratings agency said on Thursday that the Treasury’s budget projections were broadly consistent with S&P’s base-case assumptions of planned fiscal consolidation‚ albeit against a sharp downward revision of gross domestic product (GDP) growth in 2016.
"However‚ we note that the budget’s ambitious fiscal consolidation targets for 2017-18 and 2018-19 aim to reduce fiscal deficits at a faster pace than the treasury previously anticipated," said S&P.
"Nevertheless‚ we consider SA’s fiscal consolidation remains vulnerable to lower-than-expected GDP growth and shortfalls in revenues. We also consider that the fiscal trajectory continues to be exposed to contingent liabilities emanating from state-owned entities with weak balance sheets‚ which may require more support than what the government has currently provided‚" the ratings agency said.
Debt-servicing costs were vulnerable to the domestic interest-rate environment and, to a lesser extent, to exchange-rate weakness.
In addition‚ GDP growth rates were still subdued‚ and would likely remain so in the medium term‚ posing a threat to consolidation plans‚ said S&P.
"The announced budget lacks significant policy announcements that we think would immediately spur GDP growth‚ or provide much-needed business confidence to the private sector.
"Efforts in this regard continue to remain limited‚ particularly in labour relations‚ where strikes have, in the past, inhibited higher GDP growth and have the potential to do so this year again in the mining sector‚" the ratings agency said.
"We have determined‚ based solely on the developments described herein‚ that no rating actions are currently warranted. Only a rating committee may determine a rating action and‚ as these developments were not viewed as material to the ratings‚ neither they nor this report were reviewed by a rating committee‚" said S&P.
S&P’s ratings on SA are as follows: Foreign currency BBB+/Negative/A-2; local currency BBB-/Stable/A-2; SA national scale zaAAA/–/zaA-1.
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