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Fitch highlights that “together with GDP revisions, this leaves debt/GDP well below levels anticipated when we downgraded it to 'BB-' in 2020” and “inflation will return to the target range in 2027. SARB increased its policy rate by 25bp in May 2026”.
“And we anticipate another 25bp hike later this year. Supply-side constraints on economic activity, particularly the energy and logistics sectors that dragged on growth in recent years, have eased with the implementation of structural reforms”.
“This should enable growth to moderately increase in the next years. We forecast continued primary surpluses, combined with slightly stronger growth, will enable debt/GDP to be well below levels anticipated at the time of the last downgrade.”
BB is still off investment grade, which are the BBB or higher (A) categories, while BB is one away from BB-, which is just above the C categories. However, there has been a definite move in the right direction in SA’s credit ratings, the outlook is now stable.
Fitch notes factors that could cause an upgrade as “a substantial and sustained decline in debt/GDP, for example, due to persistently large fiscal primary surpluses and a reduction in debt service costs”.
And “greater confidence that medium-term growth prospects will strengthen significantly, which combined with structural reforms, will allow progress in addressing challenges from high inequality and unemployment.”
The rand ran stronger to R16.22/USD on the upgrade, and strengthened against the euro and pound too, running stronger on supportive investor sentiment, but then weakening today on the worsening of the Middle East war.
The rand continues to run volatile this year, albeit at lower extremes than in past risk-off periods which tend to have been more extreme, and has gained recently from the repo hike, now no longer in the bottom tertile off the EM Bloomberg currency ranker.
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About the author
Annabel Bishop, Chief Economist, Investec Bank Limited South Africa
Annabel Bishop joined Investec in 2001 and is the Chief Economist. She has worked in the macroeconomic, econometric, risk, financial markets, political risk, public finance and regulatory, among other, fields for around 25 years. Annabel is the holder of the Sake/Beeld Economist of the Year award for 2010 and has won numerous monthly Reuters Econometer awards, and various Focus Economics (Economic Forecasts from the World’s Leading Economists) categories for correctly forecasting a range of economic variables. She has authored a wide range of in-house and external articles, published both abroad and in South Africa. She has also guest lectured at Gibbs, the University of Pretoria, Wits, UJ and other academic institutions, and has presented at various national and international conferences. Author of the “Financial Services sector and its support to the economy“ section in the Better Choices Ensuring SA’s Future.
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