Ratings agency Fitch raised its outlook on South Africa’s ”BBB+” sovereign credit rating to positive from stable on Wednesday, citing the country’s rapid economic growth and improved prospects.
”The change in outlook reflects South Africa’s improved growth performance and prospects as a result of rapidly rising public and private investment and ongoing micro-reforms in the economy,” Veronica Kalema, a director in Fitch’s sovereign team, said in a statement.
”In addition, the country has seen a substantial improvement in its already sound public finances and strong external balance sheet,” she said.
Fitch noted last year’s 5% growth had come despite a 250 basis points increase in interest rates since June 2005 and said potential growth would move higher in the medium term.
In June, ratings agency Moody’s Investors Service revised its outlook on South Africa’s foreign-currency debt ratings to positive from stable to reflect an improvement in the country’s external credit indicators, despite widening current-account deficits that weakened the rand currency last year.
”It’s obviously a positive affirmation of the developments in the South African economy both on the domestic and external front,” said Leon Myburgh, sub-Saharan Africa specialist at Citigroup.
”But this announcement is just following what Moody’s has already done and I don’t it’s of material importance to the rand,” he said.
Fitch said South Africa’s public-debt ratios were declining fast, while the banking system was sound.
On the negative side, it said the country faced worse social problems than rated peers including income inequality, unemployment, crime and Aids.
Standard & Poor’s and Moody’s rate South Africa ”Baa1” and ”BBB+” respectively. — Reuters