National Treasury statement on Fitch Ratings downgrade
10 Jan 2013
Fitch Rating Agency (Fitch) has today downgraded South Africa's long term foreign currency credit rating to "BBB" from "BBB+", the long term local currency credit rating to "BBB+" from "A" and the short term credit rating to "F3" from "F2". Fitch has placed the country on a stable credit outlook.
Fitch cited the following factors as reasons for the downgrade:
- South Africa's economic growth performance has deteriorated which it said was likely to affect public finances and exacerbate social and political tensions;
- A secular decline in competitiveness which reflects wage settlements above productivity and infrastructure constraints which it believes to have contributed to a widening current account deficit;
- The country's public finances have deteriorated; and
- Social and political tensions have increased.
Fitch has indicated that the stable outlook is due to its belief that South Africa's credit strength will limit the speed, magnitude and the likelihood of a further potential downgrade over the typical two-year outlook horizon.
Some of the drivers of the downgrade have their roots in the protracted crisis in the Eurozone, South Africa's significant trading partner. Government is aware of the challenges of poverty and unemployment the country is facing.