{"id":290010,"date":"2025-11-17T08:37:10","date_gmt":"2025-11-17T08:37:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/290010\/"},"modified":"2025-11-17T08:37:10","modified_gmt":"2025-11-17T08:37:10","slug":"economists-welcome-sp-upgrade-but-caution-against-complacency","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/290010\/","title":{"rendered":"Economists welcome S&P upgrade, but caution against complacency"},"content":{"rendered":"

SA\u2019s first credit rating upgrade<\/a> by a major agency in years has been broadly welcomed by economists and policy experts as a sign of growing international confidence in the country\u2019s fiscal and reform trajectory. <\/p>\n

However, they caution that the path back to investment grade remains long and heavily dependent on consistent execution.<\/p>\n

Ratings agency S&P Global lifted SA\u2019s long-term foreign currency rating to BB from double B minus on Friday \u2014 the first upgrade in two decades \u2014 aligning its assessment with that of Moody\u2019s and moving the country two notches below investment grade. <\/p>\n

It also raised the local currency rating to BB+, while affirming a positive outlook, suggesting another upgrade is possible if momentum is sustained.<\/p>\n

Welcome news<\/p>\n

North-West University Business School economist Raymond Parsons said the upgrade was \u201cwelcome news\u201d that recognised the extent to which recent fiscal and growth improvements had strengthened investment sentiment.<\/p>\n

\u201cThe S&P decision has now opened the way for SA to eventually extricate itself from its current junk status,\u201d he said. \u201cBut there remains a long way to go. To regain full global investment status still requires that SA\u2019s economic steersmanship stays firmly on track over the next few years.\u201d<\/p>\n

Parsons warned that weaker growth could jeopardise fiscal progress, stressing that the implementation of \u201cgrowth-friendly policies\u201d would be critical \u2014 \u201cby ensuring that reform commitments will continue to be translated into tangible outcomes in confidence, stability, investment, jobs and service delivery\u201d.<\/p>\n

\u201cWhen reforms take root, credibility strengthens, investment follows and momentum begins to compound,\u201d outgoing JSE Group CEO Leila Fourie said.<\/p>\n

\u201cThis progress indicates that the reform path is credible, that institutions are strengthening and that the macroeconomic framework is sound. This point of inflection supports SA\u2019s position at a moment when the world has its eyes focused [on] our country,\u201d Fourie said.<\/p>\n

Positive outlook<\/p>\n

Stanlib chief economist Kevin Lings said that while the upgrade itself was significant, the retention of the positive outlook was perhaps the most encouraging element. <\/p>\n

S&P said the positive outlook reflected the potential for further improvements in fiscal metrics and debt stabilisation if the coalition government continued to consolidate the fiscus and push ahead with reforms. The outlook also leaves the door open to stronger-than-expected growth, despite global headwinds such as trade tensions and tariffs.<\/p>\n

\u201cOverall, the decision by S&P to upgrade SA\u2019s credit rating is very good news and should further support the rally in SA\u2019s bond market as well as the exchange rate. Though numerous economic and financial challenges must be overcome before SA is in a position to regain an investment-grade credit rating, especially a sustainably higher rate of economic growth,\u201d Lings said.<\/p>\n

The upgrade was supported by a combination of improved growth prospects, stronger public finances and structural reforms gaining traction. S&P expects SA\u2019s GDP growth to rise to 1.1% in 2025 and to average 1.5% in 2026-28 \u201cas reforms to electricity and other sectors support growth\u201d. <\/p>\n

Revenue collection has outperformed budget targets and, alongside restrained expenditure, this is helping the government maintain primary budget surpluses.<\/p>\n

Contingent liabilities are also expected to decline, with Eskom posting its first profit in eight years and requiring less financial support from the state. Reform momentum has accelerated under the second phase of Operation Vulindlela.<\/p>\n

The agency noted that the government of national unity (GNU) had so far held together, supporting broad policy continuity and a more stable political environment.<\/p>\n

In addition, SA\u2019s removal from the Financial Action Task Force\u2019s greylist in October was likely to reduce compliance costs for financial institutions and improve market sentiment.<\/p>\n

S&P also noted the announcement in this week\u2019s medium-term budget policy statement to lower the inflation target to 3%, with a tolerance band of one percentage point on either side.<\/p>\n

\u201cThough resulting lower nominal GDP growth could lead to lower nominal revenue collection and constrained real GDP growth due to tighter monetary policy, this is likely to be more than offset by lower borrowing costs and lower inflation-linked expenditures, such as the government wage bill (which is largely consumer price index-linked),\u201d S&P said.<\/p>\n

Risks flagged by S&P included governance backsliding, political instability and infrastructure bottlenecks \u2014 especially in logistics. The agency also highlighted ongoing losses at Transnet and warned that any weakening of the reform drive could put the outlook at risk.<\/p>\n

\u201cAttempts by the populist opposition parties, uMkhonto weSizwe, led by former president Jacob Zuma, and [EFF] to block legislation remain constant and if the current coalition collapses, less reform-minded parties could possibly join the coalition with the ANC \u2014 an outcome preferred by some on the left of the ANC. This could have a detrimental impact on growth and fiscal consolidation and remains a downside risk,\u201d S&P said.<\/p>\n

Treasury officials said the upgrade placed SA among three countries globally to have secured an S&P upgrade in 2025 while continuing to maintain a positive outlook after the rating revision.<\/p>\n

\u201cThe government is improving the health of the public finances and accelerating infrastructure investments. Over the medium term this will strengthen growth prospects, reduce borrowing costs, improve confidence and foster faster job creation,\u201d they said in a statement.<\/p>\n

Also read:<\/p>\n

ECONOMIC WEEK AHEAD: Interest rate cut likely, experts say<\/a><\/p>\n

S&P upgrades SA\u2019s credit rating for the first time in two decades<\/a><\/p>\n

Fitch welcomes SA\u2019s fiscal shift as MTBPS targets debt stabilisation<\/a><\/p>\n

SA business leaders push for return to investment-grade rating<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"SA\u2019s first credit rating upgrade by a major agency in years has been broadly welcomed by economists and…\n","protected":false},"author":2,"featured_media":290011,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,23222,164,167012,23221,167010,167009,167011,81671],"class_list":{"0":"post-290010","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-credit-rating","12":"tag-economy","13":"tag-kevin-lings","14":"tag-moodys","15":"tag-ratings-agency","16":"tag-ratings-upgrade","17":"tag-raymond-parsons","18":"tag-sp-global"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/290010","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=290010"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/290010\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/290011"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=290010"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=290010"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=290010"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}