Moody’s Downgrade To ‘Junk’ Adds To South Africa Pain

Moody’s downgraded South Africa’s sovereign credit rating to “junk” status on Friday, heaping more pain on an economy already in recession and now staring down the barrel of a steep contraction over the global coronavirus pandemic.

The ratings firm downgraded the rating one notch to ‘Ba1’ from ‘Baa3’ and maintained a negative outlook, meaning another downgrade could follow if the economy performs worse or government debt rises faster than expected.

South Africa’s finance ministry said the downgrade would add to prevailing financial market stress.

Moody’s said the main driver behind the downgrade was “the continuing deterioration in fiscal strength and structurally very weak growth”.

“The rapid spread of the coronavirus outbreak will exacerbate South Africa’s economic and fiscal challenges and will complicate the emergence of effective policy responses,” it added.

Finance Minister Tito Mboweni said the government was not “trembling in our boots” and was committed to reforms to address