{"id":15916,"date":"2012-10-26T20:08:18","date_gmt":"2012-10-26T18:08:18","guid":{"rendered":"http:\/\/www.myza.co.za\/10\/text-fitchweaker-growth-pressures-south-africa-fiscal-consolidation\/"},"modified":"2012-10-26T20:08:18","modified_gmt":"2012-10-26T18:08:18","slug":"text-fitchweaker-growth-pressures-south-africa-fiscal-consolidation","status":"publish","type":"post","link":"https:\/\/www.myza.co.za\/press\/text-fitchweaker-growth-pressures-south-africa-fiscal-consolidation\/","title":{"rendered":"TEXT-Fitch:Weaker growth pressures South Africa fiscal consolidation"},"content":{"rendered":"

\t\t<\/span><\/p>\n

(The following statement was released by the rating agency)<\/span><\/p>\n

<\/span><\/p>\n

Oct 26 – South Africa’s latest Medium-Term Budget Policy Statement shows evidence of further
\nweakening in the country’s public finances, with consolidation targets pushed back again by
\nslower than expected growth, Fitch Ratings says. Failure to deliver projected fiscal
\nconsolidation continues to erode one of the sovereign’s key rating strengths compared with its
\npeers. This erosion contributed to our decision to revise the Outlook on South Africa to
\nNegative in January.<\/p>\n

<\/span><\/p>\n

The government projected a deficit of 4.6% of GDP for FY2012\/13 in February 2012. This has
\nbeen revised up to 4.8% for the current fiscal year. The government also appears to be falling
\nbehind on its longer-term fiscal consolidation programme. In October 2010 the finance minister
\nprojected that the deficit would be reduced to 3.2% of GDP by FY2013\/14; this was raised to 4%
\nin February 2012 and is now projected at 4.5%. Although this reflects weaker-than-expected
\nrevenue growth, rather than higher expenditure, the further delay to fiscal consolidation
\nhighlights the challenges to fiscal planning and will put upward pressure on debt levels.<\/p>\n

<\/span><\/p>\n

Gross debt is now forecast to peak at 42.7% of GDP in FY2015\/16 – slightly above ‘BBB’ rated
\npeers. This is up from 27% of GDP in 2008, when South Africa’s debt ratio was among the lowest
\nin the ‘BBB’ category. Rising debt will also see interest payments as a percentage of revenue
\nrising further above the ‘BBB’ median – a situation which would be aggravated if bond yields
\nrose. The inverse correlation between bond yields and foreign bond purchases has been notable in
\nrecent years, suggesting that a substantial fall in investor confidence could lead to a sharp
\nrise in borrowing costs. Foreigners have purchased a hefty ZAR84bn of domestic bonds since
\nJanuary 2012, compared with Treasury’s planned issuance of around ZAR150bn for the current
\nfiscal year. Reduced foreign appetite for domestic debt could put upward pressure on yields,
\nalthough in the short term the inclusion of South Africa in a key global bond index provides a
\nboost.<\/p>\n

<\/span><\/p>\n

Further spending increases (as a proportion of GDP), especially non-discretionary, will
\nlimit South Africa’s already diminished fiscal headroom. High current expenditure, which
\nincludes spending on wages, subsidies and interest, makes up just over 90% of total expenditure
\nand restricts the fiscal room available to counteract any economic shocks. It also limits the
\ngovernment’s ability to deliver its ambitious infrastructure spending plans without taking on
\nadditional debt.<\/p>\n

<\/span><\/p>\n

Growth projections have also been revised lower over the past year, with negative
\nimplications for employment creation and debt dynamics. In late 2011 economists polled by
\nReuters projected growth of 3% and 3.7% for 2012 and 2013 respectively; this has now been
\nrevised down to 2.5% and 3.0%, in line with Treasury’s forecasts. As we highlighted in January,
\nfailure to accelerate growth and make it more sustainably labour intensive would hamper job
\ncreation and increase the risk of social strife, with negative implications for the investment
\nclimate and credit fundamentals.<\/p>\n

<\/span><\/p>\n

We have also highlighted long-standing structural problems that have contributed to South
\nAfrica’s weakening growth performance compared to peers, especially in education and labour
\nreform. Last year’s National Development Plan acknowledged that this has resulted in
\ninsufficient growth to create the jobs required to put a dent in an unemployment rate of 25%.<\/p>\n

<\/span><\/p>\n

South Africa’s Long-Term Foreign Currency IDR is ‘BBB+’. We expect to complete our annual
\nrating review early in the new year.<\/p>\n

<\/span><\/p>\n

\n

\t\t\u00a9 Thomson Reuters 2012 All rights reserved<\/p>\n","protected":false},"excerpt":{"rendered":"

(The following statement was released by the rating agency) Oct 26 – South Africa’s latest Medium-Term Budget Policy Statement shows evidence of further weakening in the country’s public finances, with consolidation targets pushed back again by slower than expected growth, Fitch Ratings says. Failure to deliver projected fiscal consolidation continues to erode one of the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[830,2370,183],"class_list":{"0":"post-15916","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-south-africa","7":"tag-news","8":"tag-reuters","9":"tag-south-africa-2","10":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/15916","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=15916"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/15916\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=15916"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=15916"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=15916"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}