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Johannesburg - While rating agencies Fitch and Standard & Poor's have seen fit to downgrade South Africa's outlook to negative this week, Moody's told I-Net Bridge on Wednesday that they were not about to change their positive outlook on SA's foreign currency ratings.
"Despite the macro developments, Moody's retains its positive outlook on South Africa's Foreign Currency Ratings. The economic policy stance so far is reassuring and deviations should be constrained by the markets given the large current account deficit," said Kristin Lindow, Senior Vice-President from Moody's.
"We also expect the fall in inflation will happen pretty quickly, which should ease pressure from the political arena to revise the target range," she added.
The decision by Moody's to stick to their knitting will be welcomed by the National Treasury, which was critical of the downgrades, saying they overlooked certain material facts about the macro and fiscal environments and efforts made to protect the country from the fallout of the credit crisis.
Economist from Investment Solutions, Chris Hart, also felt the downgrades were wrong as they were looking at "the wrong curve at the wrong time".
In a press conference after announcing the downgrade, head of sovereign ratings for Europe, the Middle East and Africa at Fitch, Brian Coulton, said it was very much a "prospective signal" as the country had not to date been directly affected by the global credit crisis.
He says Fitch foresees a current account gap of -8% in 2009 in SA. The National Treasury has it at -7.8%.
"South Africa built up significant imbalances before the shock," he said, noting that the current account deficit of -8% increases risks of a "hard landing" in 2009.
"Inflation [13%] is also very high relative to the [3-6%] target and could be kept high due to the [weak] rand," he added.
And then on Tuesday, Standard & Poor's credit analyst Remy Salters said: "The outlook revision reflects pressures on South Africa's balance of payments, which increase the risk of further currency depreciation and a sharper-than-anticipated correction in the current account deficit, with attendant effects on prospects for trend growth and fiscal outturns."
- I-Net Bridge