Friday, 06 May 2016 13:16

Capital outflows likely if SA downgraded

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The Reserve Bank says a further rating downgrade of South Africa could lead to capital outflows.


Releasing the Financial Stability Review on Tuesday, the central bank said for more than a year credit rating agencies have been concerned about South Africa’s rating.

In March, Moody’s Investors Service visited South Africa for its annual review. Earlier in that month, the ratings agency had placed South Africa’s long and short term ratings of “Baa2” and “P-2”, respectively, on review for a possible downgrade.

“The impact of a further ratings downgrade on the South African economy and financial system could manifest in the form of capital outflows and potential spill overs to rand-denominated South African government debt,” said the Reserve Bank.

The review - which aims to identify and analyse potential risks to financial system stability - said the persistent weak economic fundamentals, the current account deficit, budget deficit and other structural constraints led to a downgrade in the economic outlook for the country to negative.

The publication said although the 2016 Budget Speech ensured the continuation of fiscal discipline, rating agencies are still concerned about the implementation of the measures outlined in the speech.

“Rating agencies will closely monitor other factors, including economic growth,” said the bank. 

Last modified on Friday, 06 May 2016 13:25

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