Dagong downgrades South Africa's credit rating to A-

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Dagong downgrades South Africa's credit rating to A-

(Xinhua) 19:02, October 25, 2013

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Dagong Global Credit Rating Co., Ltd., a Chinese credit rating agency, downgraded the local and foreign currency sovereign credit ratings of the Republic of South Africa from A to A- on Friday while maintaining a negative outlook.

Dagong said the fiscal and current account deficits of South Africa have expanded rapidly, with the local currency devaluation leading to a massive outflow of capital and a decline in government solvency.

Given South Africa's weak domestic demand and inadequate external demand, Dagong expected the country's annual economic growth to be 2.1 percent and 2.4 percent in 2013 and 2014, respectively.

For the medium and long term, an average of 3-percent growth is expected as there are no effective solutions to solve the problems of high unemployment, high inflation and the wide wealth gap, the agency said.

Since tax revenues are constrained by the sluggish economic growth, Dagong said the South African government is unlikely to cut its fiscal deficit in the short term.

The agency expected the country's fiscal deficit rate to climb to 5.2 percent and 5.5 percent in 2013 and 2014, respectively, and the government debt ratio will rise to as high as 47.8 percent in the medium run.

Domestic pressure to increase fiscal spending ahead of elections as well as mounting external risks resulting from currency devaluation and capital outflows will leave South Africa's credit rating outlook negative for the next one or two years, the agency said.

（Editor：DuMingming、Zhang Qian）