S&P cuts South Africa outlook to negative on economic and social problems.

By bne IntelliNews March 30, 2012
Standard & Poors has downgraded its outlook on South Africa to negative from stable saying it could downgrade the countrys sovereign ratings if economic and social problems feed into the political debate in the run-up to the 2014 elections and put additional pressure on the policy framework. S&P said that South Africa's near-term political pressures have eased and that the Treasury remains committed to further gradual fiscal consolidation, but fundamental structural economic and social problems continue. They include high unemployment, low per capita growth estimated at 2.1% in 2012 and a structural current account deficit that makes the economy dependent on external financing. The difficulty of addressing economic and social imbalances could be exacerbated by increasing external pressure in a context of sluggish global growth or investor risk aversion, S&P said. The agency expects the deterioration in the global economic environment to put further pressure on South Africas economy, given that exports of goods and services account for about 30% of GDP and that the country runs persistent current account deficits. S&P sees South Africas current account gap at about 4% of GDP in 2012, with half of it funded by net foreign direct investment, and the other half through an increase in external debt, as was the case in 2011. The agency maintained its long- and short-term foreign currency ratings on South Africa at BBB+/A-2 and the long-and short-term local currency ratings at A/A-1.

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