Moody’s downgrades South Africa debt by a notch, raises outlook

Ratings agency Moody’s downgraded South Africa’s Baa1 sovereign debt rating by one notch to Baa2 on Thursday, and changed the outlook to stable from negative.

The ratings agency noted in its outlook revision that there were “poor medium-term growth prospects due to structural weaknesses, including ongoing energy shortages as well as rising interest rates”.

Moody’s however said policymakers in Africa’s second largest but most developed economy had shown “commitment to reining in government debt growth over the medium term and the broad political support for a macroeconomic strategy.

” That earned the country the improved outlook to stable status despite “further deterioration in the investor climate and a less supportive capital market environment.

“The downgrade is two notches above junk status.

The country narrowly escaped a recession in the first half of the year.

Finance Minister Nhlanhla Nene last month slashed this year’s growth forecast to 1.

4 percent, from the 2.

7 percent estimated in the February budget.