Sundaymail Editor
Fitch Ratings believes that the direct economic impact of riots in South Africa following the arrest of former president Jacob Zuma will be limited for the sovereign’s creditworthiness.
However, the violence highlights tail risks to social and political stability and could affect fiscal policy, including public-sector wage negotiations, complicating efforts to stabilise the level of government debt/GDP.
The ongoing unrest is affecting critical sectors such as transport, but we assume it will fade soon with only transitory macroeconomic effects. Even if it escalates, the effects on the economy should be temporary, and are unlikely to affect South Africa’s rating which we affirmed at “BB” with a negative outlook in May 2021. In fact, the economy has performed better than expected — we revised our forecast for economic growth in 2021 to 4,9 percent in June, from 4,3 percent in our May review.
South Africa’s record on political stability is reasonable, as reflected by its score for this subcategory of the World Bank’s governance indicators in the 40th percentile, which is only marginally worse than the median of 43 for “BB” category sovereigns. — Fitch Wires.
Online Reporter