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THE SMART NEWS SOURCE | Feb 10 2010 00:25 | LAST UPDATED Feb 10 2010 00:25 |
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Standard & Poor's cut the outlook for South African ratings to negative from stable on Tuesday on concerns about a large current account deficit and slowing world growth. The revision follows a similar move by Fitch on Monday, which was criticised by the country's Treasury. "The outlook revision reflects pressures on South Africa's balance of payments, which increase the risk of further currency depreciation and a sharper-than-anticipated correction in the current account deficit," S&P credit analyst Remy Walters said in a statement. The ratings agency affirmed South Africa's "BBB+/A-2" foreign currency and "A+/A-1" local currency ratings. It said local banks had limited exposure to the global financial crisis and should cope with an increase in bad debts as households struggle to cope with high interest rates and inflation. But the economy would feel the impact of the global slowdown. The rand had depreciated sharply this year and net portfolio flows were likely to remain negative, putting further pressure on the currency. This would add to inflationary pressures and delay an expected easing in monetary policy at a time when economic growth was easing, S&P said. The rand has weakened by around 30% against the dollar in 2008, stung by global risk aversion, a recent dip in commodity prices and concern about the financing of a currenct account deficit that stood at 7,3% of GDP last year.  CONTINUES BELOW The central bank highlighted the weak rand as a major threat to the inflation outlook. Analysts warn the rand could delay rate cuts, widely expected in 2009. S&P said part of the necessary adjustment in the balance of payments was a larger-than-expected correction in domestic demand, including through the delaying of public sector investments, which could lead to a longer period of slower growth. "The negative outlook reflects the increasing weight of short-term macroeconomic risks to our base case," Salters said, adding an orderly balance of payments correction and continued prudent fiscal policy. - Reuters TOPICS IN THIS ARTICLE
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Andrew Wright on November 12, 2008, 8:48 am
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Making it more expensive for SA to borrow internationally, especially within the context of the developed world causing the global financial problems for which we are now being punished as a country, is neither helpful nor useful - unless, of course, you sit in the priveleged throne currently occupied by the developed world's bankers, being bailed out by their taxpayers.
Makes one despair that the North vs South economic wars can ever be equalised. People will continue to starve, even in countries like SA, so long as these swine are allowed to get away with this type of politically driven & financially self-serving actions.