S&P Global Ratings on Friday said it projects South Africa’s economy to shrink by 4.5% this year. | busrep
JOHANNESBURG - S&P Global Ratings on Friday said it projects South Africa’s economy to shrink by 4.5% this year as a result of the COVID-19 pandemic that has impacted production and consumption.
In April, S&P downgraded South Africa’s credit rating further into non-investment-grade territory, saying COVID-19-related pressures would have significant adverse implications for the country’s already-ailing economy and for tax revenues. It lowered its long-term foreign-currency rating on South Africa to “BB-minus” from “BB” and its long-term local-currency rating to “BB” from “BB-plus,” with a stable outlook.
“COVID-19 will weigh heavily on GDP growth given the strict domestic lockdown that has shut down much of the economy, the markedly weaker external demand outlook, and tighter credit conditions,” S&P said. “As a result, we now project the economy to shrink by 4.5% this year.”South Africa’s lockdown has entered its ninth week, leaving many businesses and individuals struggling without income in the recession-hit economy.
S&P said the weaker macroeconomic environment would also weigh heavily on fiscal revenues, projecting that the fiscal deficit would widen to 13.3% of gross domestic product in 2020 —the widest in the country’s democratic history.“Our anticipation of an only tepid economic recovery means that public financing needs will likely remain elevated throughout the forecast period,” S&P said.
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