Moody’s lifts South Africa outlook to positive while keeping rating at Ba2

JOHANNESBURG — Moody’s has revised South Africa’s sovereign credit outlook from stable to positive, citing stronger fiscal performance and progress on reforms, while maintaining the country’s long-term foreign- and local-currency issuer ratings at Ba2.

The ratings agency said the improved outlook reflects a rising primary surplus, lower debt-service pressure and expectations that public debt will stabilise before gradually declining. The decision was welcomed by the South African government, which has been working to rebuild investor confidence after years of weak growth, rising debt and repeated support for state-owned companies. Source: Reuters.

Moody’s decision does not constitute a rating upgrade. South Africa remains below investment grade, but the outlook change signals that the agency sees a stronger probability of future improvement if fiscal consolidation and structural reforms continue. Source: Reuters.

The move follows signs that South Africa’s fiscal trajectory is improving after a period of intense pressure from sluggish growth, pandemic-era spending, electricity-sector failures and bailouts for public enterprises. Moody’s had earlier said stronger revenues, tighter expenditure management and reforms were helping stabilise the country’s debt profile. Source: Reuters.

The agency also noted that South Africa’s heavy debt burden continues to absorb a large share of government revenue, while low growth, inequality and weak economic fundamentals remain constraints on the rating. The ongoing Iran conflict and its effect on fuel-importing economies were also flagged as a risk to growth and inflation. Source: Reuters.

S&P Global upgraded South Africa’s credit rating to BB in November, marking the country’s first upgrade in nearly two decades, according to Reuters. Moody’s latest action adds to a more favourable sovereign-risk backdrop but leaves the government under pressure to maintain fiscal discipline and accelerate reforms capable of lifting growth. Source: Reuters.