(Reuters) – Credit ratings agency Moody’s (NYSE:MCO) affirmed South Africa’s Ba2 rating on Tuesday, highlighting the country’s robust financial sector and external position following a recent regime change.
Reduced power cuts and expectations of lower interest rates have improved South Africa’s financial stability following successful elections in June, the country’s central bank said in November.
The coalition government of national unity (GNU), formed in June after the African National Congress lost its parliamentary majority for the first time in 30 years, boosted business confidence.
“The ratings affirmation highlights that despite nascent improvements, South Africa’s economy is likely to remain subdued,” Moody’s said in its report. It also anticipates the energy sector to increasingly drive private sector investments.
The agency expects the country’s economic growth to remain on the slow lane and government debt burden to be stable with balanced risks.
Moody’s anticipates that the new government will likely pursue structural reforms to alleviate existing growth bottlenecks, and continue fiscal consolidation efforts to mitigate spending pressures from social demand, interest payments and state-owned enterprises.
In November, S&P revised South Africa’s outlook to positive on better reforms by the new government.
