South Africa needs stronger per capita economic growth before its credit rating can be upgraded, S&P Global Ratings said on Tuesday.
S&P downgraded South African debt to junk last year, citing a deterioration in the economic outlook and public finances. The agency will publish its next rating review on May 25.
S&P said other factors that could contribute to an upgrade in South Africa’s rating included faster debt stabilisation than currently planned.
The rating agency said it now forecasts South Africa’s gross domestic product will grow 2% in 2018, up from 1% previously. Growth of 2.1% is expected next year, up from a prior forecast of 1.7%.
Economic growth of just above 2%, or 0.5% in per capita terms – is low for a country at South Africa’s income levels, and not enough to reduce its high unemployment, S&P said.
The growth forecasts were raised partly because investor sentiment has strengthened by a change in South Africa’s leadership and ensuing policy announcements, S&P said.
Cyril Ramaphosa replaced scandal-plagued Jacob Zuma as president this year. Zuma resigned in mid-February on the orders of the ruling African National Congress party.
“We are now probably in a good situation that supports our stable outlook, but we are not yet anywhere near going upwards as far as the rating is concerned,” said S&P Global sovereign analyst Gardner Rusike.