London - Ratings agencies Fitch and Standard & Poor's said South Africa's budget and Zimbabwe's possible adoption of the rand did not threaten South Africa's rating, saying post-election policy continuity was more important.
The rand earlier hit a one-week low partially on the back of
rumours of a ratings downgrade.
Moody's was unavailable for immediate comment, but in a
statement overnight said the budget appeared "realistic".
Both Fitch and S&P rate South Africa as BBB+ with a negative
outlook. Moody's rates in the country as Baa1 with a positive
outlook, although it said upwards ratings pressure had
diminished in recent months.
Rating agencies have downgraded a string of emerging
sovereign borrowers in recent months as the global financial
crisis punishes developing economies.
Fitch said it was unlikely to take South Africa off a
negative outlook ahead of polls expected for April, with its
main concern policy continuity with ruling party chief Jacob
Zuma - who may still face corruption charges - expected to
become president.
On Wednesday Finance Minister Trevor Manuel predicted South
Africa growth of 1.2% in 2009, its lowest in more than a
decade, in his annual budget speech. Fitch head of Middle East
and Africa sovereigns Richard Fox said the outlook was grimmer
than expected but the rating was not under immediate threat.
"Growth in South Africa has deteriorated more than we
expected but that is primarily a global issue," he told Reuters
in a telephone interview.
"The budget itself did not give us particular cause for
concern. The main thing for us will be policy continuity after
the election. At the moment, we would expect the deficit to
come down as the economy recovers but if the new government goes on a spending spree that would be a problem."
Fox said Fitch would conduct its normal annual review of
South Africa after elections in April. If polls were delayed, he said it would conduct the review anyway.
While Moody's - which has the most positive ratings
position on South Africa - expressed similar views on South
Africa's budget, it did express concerns over the deterioration
of the current account. It has held the country on positive
outlook for 18 months.
"However, upwards pressure on the rating has diminished,"
Moody's senior vice president Kristin Lindow said in a statement released overnight.
"In particular, Moody's is becoming concerned over how the
deterioration in the external environment has affected the
quality of the capital account of the balance of payments and
the cost of new financing."
Fitch's Fox said any adoption of the rand by Zimbabwe would
not directly affect South Africa's rating. South African
President Kgalema Motlanthe said on Sunday Zimbabwe could adopt
the rand, but Fox said that was largely irrelevant to South
African creditworthiness.
"That would be a decision Zimbabwe could take itself
unilaterally," he said. "I wouldn't see it having a direct
impact on South Africa's rating although of course if it helped
Zimbabwe stabilise itself that would be good for South Africa."
S&P analyst David Beers expressed similar views in a
telephone interview.
"We would not say that the budget announcement the other day
in South Africa is anything other than in line with what we were expecting so that's not something that would change our view at this point," he said.
"Whether or not a tiny amount of rand is circulating in the
... economy of Zimbabwe has no bearing on the sovereign rating
of South Africa."
- Reuters