The Treasury is hopeful that Moody’s Investors Service will not downgrade SA’s sovereign credit rating to junk status when it announces its decision at the end of the month.
A Moody’s downgrade would also weigh on growth, with the Treasury factoring in a contraction of 1.2% for 2019, as opposed to a growth forecast of 1.5%, should a downgrade take place, said Duncan Pieterse, acting director-general of economic policy. A further contraction of 0.2% in 2020 is expected in such a scenario, he said. Prolonged and constant load-shedding by Eskom would result in a forecast growth rate of 0.2% in 2019.
“We have been in discussion with the ratings agencies. Of course there has been slippage on the headline fiscal numbers, which has been noted and which is credit-negative,” Stuart said in a briefing to parliament’s finance committees. He and other Treasury officials were responding to comments on the budget made during public hearings earlier in the week.
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