SA mini budget is credit-negative, says Moody's

South Africa’s mid-term budget unveils a weaker fiscal outlook, which is credit-negative, Moody’s Investors Service said.

“The revenue assumptions underpinning the medium-term fiscal projections are achievable, but the broadly unchanged spending ceilings will be challenging to meet as the government aims to strike a balance between economic, social, and fiscal objectives,” the credit company said in an issuer comment on Thursday.

Moody’s, the only one of three major ratings companies that still assesses South Africa at investment grade, has said it wants to see government debt stabilising.

It will peak two years later, and higher, than previously forecast, Finance Minister Tito Mboweni said in the mid-term budget policy statement on Wednesday. The fiscal gap will widen further and state revenue will continue to undershoot, he said.

The Treasury more than halved its economic growth forecast for 2018 to 0.7% after the economy plunged into a recession in the first half of the year.

Gross domestic product hasn’t expanded at more than 2% annually since 2013 and unemployment is at 27%.

* Visit Fin24's 2018 mini budget hub for all the news, views and analysis.