(Adds analyst comments, details, background)
By Xola Potelwa
JOHANNESBURG Jan 13 (Reuters) – Fitch cut South
Africa’s rating outlook to negative on Friday, saying it had
seen limited progress on several long-standing structural issues
that had caused Africa’s biggest economy to fall behind its
peers.
Fitch, which has a BBB+ rating on South Africa, said the
inability to create jobs in an economy with 25 percent
unemployment was putting pressure on growth and narrowing the
tax base.
While South Africa’s external finances were still in better
shape than its peers they were deteriorating and a failure to
accelerate growth would weaken credit fundamentals, Fitch said
after cutting its outlook on the rating from stable.
The rand fell 2 percent against the dollar to a
one-week low of 8.21 after the move, while South Africa’s 5-year
credit default swaps rose 10 basis points.
After Fitch’s announcement, South Africa’s Treasury said
that it was committed to prudent execution of growth and
employment policies. The country’s fiscal framework would remain
robust over the medium term, it said.
Some analysts said they did not expect the move to lead to a
downgrade of South Africa’s rating.
“I don’t think anything in South Africa has changed to
justify the Fitch move. They are picking up on noise. It is
noise in South Africa and heightened sensitivity globally,” said
Investec economist Annabel Bishop.
Continued…
