This archive report was first published on 15 July 2020.
Published on July 15, 2020, S&P Global Ratings has revised its forecast for South Africa's economy, predicting a 6.9% contraction in 2020, a significant increase from its previous estimate of a 4.5% decline.
The downgrade is attributed to the worsening coronavirus situation in the country, which has led to a further hit to confidence, already low before the pandemic, amid concerns about the fiscal trajectory.
On April 30, S&P Global Ratings downgraded South Africa's long-term foreign-currency credit rating to BB- (junk), three notches below investment-grade, from BB. The long-term local-currency rating was also lowered to 'BB' from 'BB+'.
However, S&P's growth forecast is more optimistic than the National Treasury's prediction of a 7.2% shrinkage. The Treasury predicts debt to gross domestic product will breach 80% as the government borrows more to fund its response to the pandemic.
The South African rand has slumped 23% in 2020, and the African Development Bank (AfDB) projects that Africa's GDP will contract by 3.4% in 2020, with cumulative GDP losses ranging between $173.1 billion and $236.7 billion in 2020-2021.
