“The continued exceptionally high inequality and high unemployment (27.5% at end-2017) could raise long-term pressures for measures that might harm fiscal sustainability or growth prospects,” according to Fitch. “However, despite serious challenges over the last years, South Africa’s institutions, including the judiciary, SARB and the National Treasury, have shown significant resilience.”
Earlier this year, S&P applied a stable rating to South Africa, not a negative rating, although that ratings agency has a junk rating on the country. Additionally, the country is expected to post solid GDP growth this year.
“The current account deficit narrowed to 2.5% of GDP in 2017 but Fitch expects it to widen moderately, to 3.6% of GDP in 2019, on the back of stronger domestic demand. South Africa will be exposed to a tightening in global financing conditions given that more than 40% of domestic bonds are held by non-residents and that the current account deficit is mainly financed by portfolio inflows,” according to Fitch.
For more information on the South African markets, visit our South Africa category.