Economists are divided on what Moody’s Investors Service will do when it potentially makes an announcement on South Africa’s credit assessment Friday. Half the participants in a Bloomberg survey expect it to maintain a stable outlook on its local- and foreign-currency debt, with the remainder predicting a reduction to negative. Many of those who foresee no change say there may be a move after the May 8 general election.
“I’m actually surprised that they’ve spared us this long,” said Lullu Krugel, the chief economist at PwC. “My call is that it is time. If I were them, I would pull the trigger” on the rating, she said. A cut wouldn’t be “the end of the world” because that’s already priced into assets, and while new debt would be more expensive, local equity markets could become even more attractive, Krugel said.
Moody’s will probably give South Africa “the benefit of the doubt” after Finance Minister Tito Mboweni said the country’s strict conditional support for Eskom won’t involve putting the company’s debt onto the sovereign balance sheet, said Inan Demir, Nomura’s head of Europe, Middle East and Africa economics.