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Davies: I hope Moody’s will cut us some slack

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Trade and Industry Minister Rob Davies is hopeful that Moody’s will consider improvements underway and the impact these will have in the medium term, when the rating agency makes its decision on South Africa’s credit rating.

The minister was speaking on government’s role in SA’s economic recovery, at an event hosted by the Cape Town Press Club on Tuesday.

Responding to a question about the possibility of a credit rating downgrade this week, Davies said he hoped Moody’s would “cut us some slack”.

Davies, who has interacted with Moody’s a “few times”, said it was important for the ratings agency to understand that the country was trying to put things right.

Moody’s is the only ratings agency which has SA ranked at investment grade at Baa3 with a stable outlook.

Numerous economists Fin24 have spoken to expect Moody’s to keep the rating at investment grade, but to downgrade the outlook to negative.

Early on Tuesday morning, Investec chief economist Annabel Bishop issued a market outlook on the impact of the rating decision, highlighting that Eskom’s debt burden and the impact of load shedding on economic growth could risk an actual credit downgrade to junk status.

A downgrade would result in outflow of between $8bn to $10bn, with consequences such as higher petrol prices, inflation and interest rates.

Moody’s views the national budget in February 2019 as credit negative, with debt ratio projections to peak at 60% by 2023/24 and the fiscal deficit expected to widen to 4.5% for 2019/20.

(Source: Fin24)

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