13 June 2014

South Africa: Treasury Notes Rating Agency Decision

Photo: Anglo Thermal Coal
Miners at the coal face in Greenside Colliery.

National Treasury says it has noted rating agency, Fitch Ratings' decision to revise the country's outlook from stable to negative and that government is aware of the growth challenges the country faces.

"The National Treasury notes Fitch Ratings' decision to affirm the country's long-term foreign and local currency Issuer Default Ratings (IDRs) at 'BBB' and 'BBB+' respectively.

"However, Fitch has revised South Africa's outlook to negative from stable, saying the country's growth outlook has deteriorated and this will make it challenging to reduce the budget deficit," said Treasury in a statement on Friday.

The rating agency expressed concern about the country's growth, partly from the platinum belt strike that started in January which as affected part of the mining sector.

In May, it was announced that the country's Growth Domestic Product (GDP) had slowed to 0.6% in the first quarter of 2014 following a contraction in the mining sector. However, the Reserve Bank said that it is unlikely that the country will fall into a recession.

"Efforts to bring an end to the strike continue and government has called on all parties to seek an end to the deadlock.

"Government is alive to the growth challenges South Africa faces. It has therefore, prioritised the accelerated implementation of the National Development Plan, with reforms that are aimed at unlocking South Africa's growth potential," said Treasury.

Government said National Treasury will redouble its efforts to improve the regulatory environment, reduce the skills shortage and accelerate its infrastructure investment programme so as to reduce the bottlenecks constraining growth.

"Regarding fiscal consolidation, government is resolute in its commitment to maintain fiscal sustainability and keep its debt within manageable levels. Indeed, fiscal stability has been the hallmark of South Africa and will remain so.

"We are committed to the fiscal path and expenditure ceiling. While short term cyclical factors might cause marginal deviations from targets, we will not deviate from the long term trajectory. All necessary adjustments will be made to achieve the fiscal path," it said.

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