South Africa's Credit Rating Further Downgraded... "Deeper into Junk Bond Quagmire"

Moody's Downgrades South Africa's Credit Rating by Two Notches to Ba2
"Financial Capacity Further Weakens" Outlook

[Asia Economy Reporter Yuri Kim] On the 20th (local time), South Africa plunged deeper into the junk bond (non-investment grade bond) quagmire following credit rating downgrades by international credit rating agencies Moody's and Fitch, Bloomberg reported.

Moody's downgraded South Africa's sovereign credit rating by two notches from investment grade to Ba2. Previously, it was Ba1. The rating outlook was maintained as 'negative.' Fitch also adjusted its rating from BB to BB-, lowering it three notches below investment grade. The outlook is also 'negative.'

Moody's stated, "The downgrade to Ba2 reflects the expectation that South Africa's fiscal capacity will weaken further in the medium term." Fitch added, "The pandemic severely impacted South Africa's economic growth, and the gross domestic product (GDP) is expected to remain below 2019 levels even in 2022."

The South African Treasury said in a statement, "The decisions by Moody's and Fitch are painful," and "urgent economic restructuring is necessary to prevent further damage to the sovereign credit rating."

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