South Africa’s sovereign rating was upgraded from stable to positive on Friday, following a week of bad news regarding interest rate hikes and the looming R3.50-per-litre petrol price hike that economists expect from June 1.
BER economists said S&P Global’s move to upgrade the outlook of SA’s sovereign rating from stable to positive on Friday night was “some unexpected good news” on the back of the SA Reserve Bank’s latest 50-basis-point (bps) interest rate hike on Thursday.
“S&P cited the improved fiscal picture as well as the expectation that SA’s current account will remain in surplus for a third year as key reasons for the change in outlook. The agency did, however, flag that (fiscal) risks remain and that, while some improvement with reform targets has been made, the economy is still held back by structural constraints,” the BER said. All three major global rating agencies still have a sub-investment rating assigned to SA’s debt, however the risk of further downgrades has been removed, with the ratings from Fitch and Moody’s now a “stable outlook”.
The BER said the SARB had reflected a more hawkish view during its media briefing following its decision to increase the repo rate by 50bps.
“Depending on how the data turns out and the behaviour of the rand exchange rate, another 50bps increase may be on the cards for July,” the BER economists warned.
They also raised concern that economic pressure was building on the back of load-shedding and further floods in KwaZulu-Natal at the weekend.
“Worryingly, daytime stage four load-shedding was implemented on Saturday, with further (evening) load-shedding expected this week. Sadly, parts of KwaZulu-Natal again saw heavy rains over the weekend, potentially worsening infrastructure damage from the April floods,” the economists added.
Economists last week told Freight News that they anticipated a R3.50/l petrol price hike in June due to the rising oil price and deteriorating rand/dollar exchange rate, as well as the expected removal of the government’s R1.50 relief at the pumps that ends in May.
