Moody's has downgraded the long-term foreign-currency and local-currency issuer ratings of South Africa to Ba1 from Baa3, with the outlook remaining negative.
The downgrade was attributed primarily to the "continuing deterioration" in fiscal strength and "structurally very weak" growth, and the rating agency's expectation that these issues are unlikely to be addressed effectively under current policy settings. Both outcomes speak to weaker economic and fiscal policy effectiveness than Moody's previously assumed.
The outlook remains negative because of the risk that the economy will grow at an even slower rate and the country's debt burden will rise even faster and further than currently expected. Moody's warned that these factors could weaken debt affordability and potentially, access to funding.
The country is entering a period of lower global growth in an economically vulnerable position given unreliable electricity supply and persistent weak business confidence and investment. Moody's said that South Africa's economic and fiscal challenges will be made worse by the coronavirus outbreak.