Fitch downgrades S.Africa rating with negative outlook

Fitch further downgraded South Africa’s rating on Friday to BB from BB+ with a negative outlook, piling more pressure on the economy already in recession and battling the coronavirus pandemic.

The downgrade came as the country’s rand tumbled to record lows, to trade at 19.02 against the US dollar, and a week after Moody’s lowered South Africa’s credit rating to junk status.

Fitch and S&P had already cut the credit rating of Africa’s most developed economy to sub-investment level in 2017.

“The downgrade of South Africa’s ratings is a result of the lack of a clear path towards government debt stabilisation as well as the expected impact of the COVID-19 shock on public finances and growth,” said Fitch.

Fitch forecasts South Africa’s GDP to contract by 3.8 percent in 2020 due to the coronavirus crisis and the recession which the country slipped into in the final quarter of 2019.

Africa’s most industrialised country is only expected to moderately recover by 1.7 percent in 2021.

Last week Moody’s downgraded the government’s debt to junk status citing a “continuing deterioration in fiscal strength and structurally very weak growth”.

The latest of downgrade came as the country observed its eighth day of a nationwide lockdown aimed at curbing the spread of the novel coronavirus.

The tally in Africa’s worst-affected country now stands at 1,505 infections with seven deaths.

The “government is seized with addressing and minimising the impact of COVID-19, implementing measures to improve economic growth and setting government finances on a sustainable trajectory,” Finance Minister Tito Mboweni said in a statement.

South Africa has posted its weakest growth rates ever in the past five years — never exceeding 1.3 percent and in some years falling below one percent.

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