Moody’s Change Negative Outlook To Stable
In 2020 SA was downgraded by Moody’s rating agency to what is commonly referred to as “Junk” status (or “don’t bother investing here if you are a big corporate or government investor” status). This meant that many larger investors had to pull out and start investing elsewhere which negatively hit the market over time.
Turning a Corner?
With the continuing pandemic and riots and political uncertainty, the rating continued to drop over time. Moody’s kept saying things look to get worse and worse and at present, the rating sits at 2 levels below investment-worthy in their books (a Ba2 rating). What has now changed is their outlook (or prediction for where things are going next).
Moody’s have now adjusted their negative outlook to a stable one.
‘Moody’s have now adjusted their negative outlook to … stable’
Why the Change?
Moody’s says this is because of how Government has adjusted spending and prioritised the correct things and has avoided taking on mountains more debt. In particular, Government has done much better in not taking on more debt than they expected (only 1.3% of GDP vs an expected 3.4%). In fact, Government used part of the extra income they earned, via taxes this year, to pay down some of their debt.
They also feel that SARS are starting to rebuild their reputation and effectiveness after several years of going downhill.
On the other hand, they remain worried about load shedding, failing SEOs and problems in the labour market. This prevents them from changing the outlook further to positive but they will keep an eye on these things and see how things go in the near future as the country begins a period of political manoeuvring.
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