S&P Global Ratings downgraded South Africa deeper into junk territory on expectations that the coronavirus pandemic will drag the country into a sharper economic downturn in 2020 than initially foreseen.
The rating agency downgraded South Africa's long-term foreign-currency sovereign credit ratings to BB- from BB and its local-currency counterparts to BB from BB+, with stable outlooks. The country's short-term ratings were affirmed at B.
The country's contracting economy will face a further sharp COVID-19-related downturn in 2020, S&P Global Ratings said. The rating agency now expects South Africa's economy to contract 4.5% in 2020, compared with a prior estimate of a 1.6% expansion.
Pressures related to the pandemic will have significant adverse implications for South Africa's already weak fiscal position, the rating agency added. The country's headline fiscal deficit is expected to widen to 13.3% of GDP in 2020, the highest level in its democratic history, while net debt levels will exceed 75% of GDP by year-end.
The stable outlook reflects pressures related to South Africa's weak economic and fiscal positions balanced against the country's deep financial markets and monetary flexibility.
S&P Global Ratings' action comes a month after Moody's downgraded South Africa's long-term issuer ratings into junk territory.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.