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Raises South

S&P raises South Africa’s outlook to ‘positive’ on trade terms, fiscal discipline

© Reuters. FILE PHOTO: The Hillbrow Tower, an iconic tower used to identify the Johannesburg skyline, is seen as the sun rises, in Johannesburg, South Africa, June 20, 2019. REUTERS/Siphiwe Sibeko

(Reuters) – Ratings agency S&P revised South Africa’s outlook to “positive” on Friday, saying it reflects favourable terms of trade and a path toward contained fiscal expenditure for the country.

S&P upgraded its outlook from “stable” and affirmed the “BB-/B” foreign currency as well as “BB/B” local currency ratings on South Africa.

“Recent favourable terms of trade in South Africa have improved the external and fiscal trajectory, while the country’s reasonably large net external asset position, flexible currency and deep domestic capital markets provide strong buffers against shifts in external financing,” S&P said in its report.

S&P said it expects South Africa’s fiscal deficit to remain elevated, but gradually narrow to 5% of GDP by fiscal 2025.

The economic growth of Africa’s most industrialised country is expected to slow to 1.7% this year, according to the central bank’s forecast on Thursday, from a 4.9% expansion last year, as it recovers from a contraction in the wake of the COVID-19 pandemic.

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