SA’s post coronavirus economic recovery faces risks -Moody’s

The firm’s next credit review would come after Finance Minister Tito Mboweni’s medium-term budget.
Image: Scott Eells/Bloomberg

South Africa’s post coronavirus economic recovery will face a number of constraints, with risks of a larger than forecast contraction this year tilted to the upside, ratings firm Moody’s said on Monday.

A recession deepened by the impact of the coronavirus has frustrated economic reform efforts in the country aimed at reducing government debt and attracting foreign investment.

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Moody’s rates the country’s debt at sub-investment grade – as do the other two main ratings firms S&P and Fitch – and forecast earlier this month that the South African economy would shrink 6.5% in 2020.

In a virtual conference Moody’s lead analyst for the country, Lucie Villa, said the main concern was the government’s “exit strategy” as it unwound Covid-19 economic support measures and reinstated the fiscal consolidation promised before the pandemic.

Villa said the firm’s next credit review would come after Finance Minister Tito Mboweni’s medium-term budget, due in October, and there was “quite some downside risk” to the economic forecast for 2020.

“In all likelihood we’re going to remain in an environment whereby the government is highly constrained in terms of slowly removing the support measures for the economy. Of course if you go too quickly or too slowly you jeopardise the recovery.”

Any further cut to the country’s credit rating could push up government borrowing costs.

Soon after imposing one of the strictest lockdowns in the world in March, President Cyril Ramaphosa announced a R500 billion stimulus package that included tax waivers for business and higher social and unemployment income grants.

The strict lockdown saw the economy contract by a record 51% in the second quarter on an annualised basis, or 16.4% in unadjusted terms, and the stimulus support has been criticised as too small and badly administered.

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GDP for 2020 likely to be -10% to -12%. But a lot will depend on Q4 tourism, level of the ZAR, business confidence etc.

We need R500bn ie about USD30bn so about half the NAV of George Bezos ex wife….this demonstrates just how poor we are as a country…and how rich Mrs Bezos is! USD30bn is probably a good value investment for that adorable chap..President Xi and he could probably buy the country with that!

Bezos as owner of Saffa. Sounds like a good private equity deal. Dress it nicely and flog it for double the price in 12 months.

Regrettably I don’t share your pessimism. Saffa is in good state, if you compare Saffa to other African/Asian/Middle Eastern/Pacific Islander/South American countries of same demographics you will quickly realize Saffa is not that bad.

I am always baffled how we compare ‘The few super rich – Bezos, Musk, Apples, Zuckerberg’s etc’ with Saffa. There are at least 6 billion other people that are worse off than the average Saffas. Why not compare us to this 6bn.
Hint. Board a plane and travel the world – not the tourist fancy places i.e NY, Sydney harbour bridge. Get behind the scenes (where the tourist don’t go) and chk how ordinary people live. A few nice things to look for
1. San Diego USA – White men on side of road with supermarket trolleys loaded with cupboard;
2. Sydney Australia – White men sweeping streets.
3. Singapore – People rummaging through rubbish bins .

You have a point. Compared to many third world countries things are not that bad here. Now teach that to the unions..

Given they throwing another R10bln at SAA, another downgrade is on the cards

SCary stuff…. and very frustrating.
We got idiots running this.

I am baffled. Another statement without substance – showing a lot of ignorance.

Yes, it appears that it does not take a lot to baffle you. Perhaps you should humble yourself to learning more and posting less

”President Cyril Ramaphosa announced a R500 billion stimulus package that included tax waivers for business and higher social and unemployment income grants.”
Incorrect, there have been no tax waivers for business, some concessions in the form of delayed payments of taxes.

End of comments.

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