Moody's downgrade won’t have big impact - economist
Updated | By Sinethemba Madolo
Efficient Group economist Francois Stofberg believes the mooted downgrade from Moody's will not have a severe impact on the economy.
The international ratings agency says the 3,2% contraction in the economy in the first quarter is credit negative for South Africa’s government and the country's banks.
Moody’s is the last of the big three international credit firms to rate South Africa at investment grade.
Stofberg says the credit rating agency is most likely to downgrade the foreign currency and not the local.
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"It most likely, in most instances, they will be downgrading us at least on foreign currency debt and I'm hoping not on our local currency debt. They are the only credit agency to not downgrade us to junk status at all. They have us on investment rate both on our local and foreign debt.
“So they will most likely only downgrade our foreign debt and not our local debt."
Stofberg says the impact won't be severe since international investors are already used to the weak South African economy.
"I think the rest of the world and investors have already gotten used to the theme of non-investment gradable bonds and securities in South Africa.
"I don't think it's a new theme. I think a lot of investors in South Africa and abroad are aware of the deteriorating nature of our economy, so I think a lot of the negative sentiment is already priced into our currency and our markets."
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