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Fitch Lowers SA's BBB+ Rating
| News by Staff ReporterFrom positive to negative, citing insufficient job creation and economic growth
Global ratings agency Fitch on Friday revised South Africa’s BBB+ rating from stable to negative, citing “limited progress on some long-standing structural issues”.Purvi Harlalka, director in Fitch’s Sovereigns group, said one of the country’s main problems was its inability to create sufficient jobs for its labour force.
“This inability has not only constrained growth and kept the tax base narrow but has also caused public finances to become increasingly redistributive in an effort to address the lack of social mobility.
“The resultant narrowing of fiscal space undermines a key support to South Africa’s creditworthiness,” she said.
According to Fitch South Africa’s average economic growth over the last five years, at 2,7%, is below the average in similar economies. In addition to this SA’s unemployment rate is at a high 25%.
Fitch said, “High unemployment already fosters widespread criminal violence and deters foreign investment. Over time it could also threaten social and political stability, damaging the investment climate further.”
In November 2011 Moody’s Investors Service dealt a similar blow when it dropped SA’s outlook on the sovereign A3 rating from stable to negative.
Source: www.bizpremises.co.za
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