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Treasury hails `stable` outlook in Fitch rating

Source: Fin 24, 16/12/2021


• National Treasury said the latest rating of South Africa by Fitch signaled a better-than-expected performance from the economy.
• Fitch`s affirmed South Africa`s long term foreign and local currency debt ratings at BB-, revising the outlook from negative to stable.
• National Treasury said while the pandemic continued to serve as a headwind for South Africa, it was unlikely to sink long-term creditworthiness.
National Treasury said the latest rating of South Africa from sovereign credit rating agency Fitch signaled a better-than-expected performance from the economy as the country continued its recovery from the ongoing Covid-19 pandemic.
Fitch`s affirmed South Africa`s long term foreign and local currency debt ratings at BB-, revising the outlook from negative to stable.
Statistics South Africa announced in early September that the South African economy grew by 1.2% in the second quarter of 2021, which was a 19.3% increase from the same period in the previous year, when the country was in a hard national lockdown aimed at curbing the spread of Covid-19.
In its rating Fitch also noted a `surprisingly strong fiscal performance` for the year with improvements in key fiscal indicators following the rebasing of its national accounts. A National Treasury statement released on Thursday said while the pandemic continued to serve as a headwind for South Africa, it was unlikely to sink long-term creditworthiness.
`The agency warns that the pandemic continues to weigh on economic performance and remains a source of downside risk for public finances.
`However, the likelihood of severe negative effects on creditworthiness has declined over the last year despite the recent emergence of the omicron variant of Covid-19 and the associated rapid surge in new cases in South Africa,` said the statement.
The Treasury statement said government would continue to demonstrate its commitment to fiscal sustainability and `enable long-term growth by narrowing the budget deficit and sizable debt`, in line with Minister of Finance Enoch Godongwana`s medium-term budget policy statement (MTBPS) in November.
`As stated in the MTBPS, government will use part of the higher tax revenues associated with the recent commodity price surge to narrow the deficit, while increasing non-interest expenditure to support key spending priorities,` the statement said.
The statement said government would continue to prioritise faster structural reforms, unlock private sector investment and introduce interventions aimed at driving economic growth and job creation.
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