Standard and Poor’s on Wednesday lowered the credit rating for South Africa by one notch to “BB-” due to the “significant adverse implications” of the coronavirus pandemic on the country’s already-weakened economy.
“South Africa’s already contracting economy will face a further sharp COVID-19-related downturn in 2020,” after contracting in the second half of 2019 due partly to the severe rolling power blackouts, the ratings agency said.
While the agency said the early efforts to contain the spread of the virus have limited the health impact, “The COVID-19 health crisis will create additional and even more substantial headwinds to GDP growth.”
Coronavirus infections rose to nearly 5,350 cases and 103 deaths — the highest in Africa — though the spread has slowed and President Cyril Ramaphosa announced he will begin to gradually ease the five-week lockdown starting on Friday.
S&P projects the South African economy will shrink by 4.5 percent this year compared with the November 2019 estimate of growth of 1.6 percent.
President Cyril Ramaphosa last week unveiled a large economic-support package totaling about R500 billion ($27.5 billion), which is about 10 percent of the country’s GDP. However, S&P said some of that can be financed by the IMF and other development lenders.
According to the latest International Monetary Fund (IMF) forecasts, the Covid-19 pandemic is expected to reduce South Africa’s growth by -5.8% in 2020.
Earlier this month, Moody’s and Fitch downgraded the country’s rating for the same reasons.