After a jittery week, credit ratings agency Moody’s opted not to make a call on South Africa’s credit rating on Friday evening.
It was anticipated that the agency would potentially shift its outlook on the country from stable to negative — but the chance that it would do nothing was also a possibility. Instead, early on Saturday morning it released a short statement saying that South Africa’s rating had not been updated.
The agency has typically been more accommodating to South Africa than its peers Standard & Poor’s and Fitch, both of which downgraded the country to junk status in 2017.
With no call made, it now becomes a question of just when the axe will fall, particularly whether it will come directly after the May 8 elections.
Peter Attard Montalto, head of capital markets research at Intellidex, said in a research note that the failure to act would likely be marginally bad for sentiment in South Africa, as “the dagger still hangs over the economy with no new sense of how close to the edge things are with an update.” This was despite load-shedding in recent weeks, and the fact that Moody’s told investors it was updating its forecasts during the second half of March, he noted.
The next ratings assessment is due at the start of November after the medium term budget policy statement. But said Montalto the possibility of a post elections decision is high.
A downgrade was nevertheless “inevitable”, he said, given among other things, a budget deficit that will not consolidate below 4% of gross domestic product and economic growth that is not expected to reach 2%.