JOHANNESBURG, Aug 30 – S&P Global Ratings said in a report published on Thursday that South Africa’s sovereign credit ratings were unlikely to be downgraded deeper into “junk” territory, after Turkey’s ratings suffered that fate earlier this month.
S&P, one of two major ratings agencies to rate South Africa’s foreign-currency debt below investment grade, added in the report that the country’s external metrics were solid and that its monetary flexibility was a credit strength.
The agency downgraded Turkey’s sovereign rating deeper into “junk” status on Aug. 17 in the wake of a steep slide in the lira, which also rocked emerging market currencies like the rand.
“The main reason for Turkey’s downgrade was our expectation that the extreme volatility of the Turkish lira and the resulting projected sharp balance of payments adjustment will undermine Turkey’s economy,” S&P said in the report.
“By contrast, we have a stable outlook on South Africa, reflecting a potential modest pick-up in economic growth, steady public debt dynamics, and our expectation that the government will gradually implement economic and social reforms.”
S&P is next scheduled to review South Africa’s sovereign ratings in November.
In May, S&P affirmed South Africa’s foreign-currency debt at ‘BB’. (Reporting by Alexander Winning Editing by James Macharia)