ABN - International finance assessing agency S&P Global Ratings has cut South Africa’s local currency debt score to junk, in a further blow to the nation's investment outlook.
The decision is the second such instance of S&P downgrading South Africa's investment status this year after its international credit rating was also cut to junk at the start of 2017.
S&P lowered South Africa’s local currency rating to BB+, one level below investment grade and placed it on a stable outlook. The ratings agency also took down the nation’s foreign currency debt score to BB.
Meanwhile, Moody’s Investors service decided to keep both readings on Baa3, its lowest investment grade score, but placed South Africa on review for a downgrade.
In a statement S&P said: “[The decision] reflects our opinion of further deterioration of South Africa’s economic outlook and its public finances.
“Economic decisions in recent years have largely focused on the distribution - rather than the growth of - national income. As a consequence, South Africa’s economy has stagnated and external competitiveness has eroded.”
The consequences of Moody’s following suit in downgrading its investment statuses could prove disastrous for South Africa, as the risk of a selloff from global indexes, such as Citigroup Inc.’s World Government Bond Index, would increase significantly.