South Africa's budget was an exercise in 'fiscal control' - S&P Global Rating
South Africa's 2021 budget did not focus enough on economic reforms, making a sustained rebound in its gross domestic product unlikely, S&P Global Ratings said on Tuesday.
"There's been some new momentum on pushing structural reforms ... but it's still reasonably thin, and again the budget was more a sort of fiscal control exercise rather than a structural reform exercise," said S&P analyst Ravi Bhatia, during a webinar.
"So there is no reason to really expect a big, sustained rebound in the growth trajectory going forward. So that is concerning." In November, S&P affirmed its long-term foreign-currency rating of BB-, or three notches below the investment grade. It kept the country's local currency debt at BB, both with a stable outlook. Fitch and Moody's also rank South Africa's debt junk.
The response to Finance Minister Tito Mboweni's budget, where he promised a steady stabilisation of the country's yawning fiscal deficit and debt stock, has been lukewarm from ratings agencies and investors.
S&P said it could raise the credit rating if economic reforms materialised and boosted per capita incomes, giving government space to raise tax revenues. But it warned bailouts to state-owned companies, especially power utility Eskom, remained a big risk.
"South Africa has shied away from significant structural reforms, which would lead it to a big growth rebound," said S&P's Bhatia.
"There's been a slow, step-by-step approach ... and there hasn't been big labour market reform, either."
Would you like to comment on this article or view other readers' comments? Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.