Latest Fitch rating ‘slightly reassuring’, says economist

The positive outlook on the country’s power crisis, however, was not enough to put a positive spin on the country's growth prospects or ballooning government debt.

In its latest ratings report, Fitch projected that the local economy will grow by 0.9%  this year and 1.3% in 2025.

Fitch said the economy will continue to face headwinds caused by the energy crisis, the problems in the struggling logistics sector and a high level of inequality.

The international ratings agency also warned of the impact of government debt - which it expects to reach 83.2 % of GDP in the next year, from an estimated 76% currently.

This is above 52%, which is the median of BB-graded countries.

Chief Economist at Econometrix Azar Jammine says the outlook will not change anytime soon.

"The fact that Fitch left our credit rating unchanged at BB minus, but more importantly, it also left the outlook stable, is slightly reassuring that there's going to be no rush to downgrade our credit ratings anytime soon.  

"One of the reasons why Fitch has projected an increase in the public debt to GDP ratio is because it does foresee that National Treasury will have no option to give out another R50 billion to help Transnet. 

"This amount of money may sound like it's a lot, but it's actually 1% of GDP."

Transnet has struggled to provide adequate freight rail and port services in South Africa due to equipment shortages and maintenance backlogs after years of under-investment.

The logistics utility's underperformance has impacted commodity exports and other sectors, such as manufacturing and retail, weakening an already struggling economy.

ALSO READ: