S&P slashes S Africa's credit rating

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Combined with multi-year highs for various indicators of output, demand, employment and inflation in November, the market outlook for the single currency remains strong.

The finance ministry says the new policy will be "decisive", aiming to increase the sustainability of its fiscal system.

Moody's Investors Service then announced that it had placed the Baa3 long-term issuer and senior unsecured bond ratings of the government of South Africa on review for downgrade.

"South Africa's economy has stagnated and external competitiveness has eroded", the ratings agency said.

"However, despite this resilience, the downgrade is a blow for South Africa and it could and should have been avoided".

South Africa's unemployment stands at 28 percent, whilst GDP growth has slowed to 1 percent annually.

The downgrade by S&P comes after Finance Minister Malusi Gigaba shocked markets on October 25 by flagging sharply weaker growth expectations, a wider budget deficit and rising government debt.

"We expect that offsetting fiscal measures will be proposed in the forthcoming 2018 budget in February next year, but these may be insufficient to stabilise public finances in the near term, contrary to our previous expectations".

South Africa's main opposition party, the Democratic Alliance (DA) dubbed the junk status as a vote of no confidence in the ANC, and a failure of the ruling party's radical-left experimentation, which has lasted for over 20 years.

This means both its ratings are now in junk state status with the foreign currency rating two notches below junk. It followed a similar announcement by third major ratings agency Fitch, affirming South Africa's rating at sub-investment or junk status on Thursday.

The government has since appointed a judicial commission of inquiry into the causes of a 50 billion rand ($3.6 billion) revenue shortfall and to investigate a possible erosion into the nation's revenue collection capability. Business confidence is near the lowest level in more than three decades amid allegations of corruption against state company managers and politicians including President Jacob Zuma.

In April, Fitch downgraded South Africa's credit rating to sub-investment grade after Zuma abruptly fired Pravin Gordhan as finance minister, saying it would likely result in a change in economic policy direction.

Why is the South African Rand (ZAR) the Worst Performing Currency of 2017?

In a statement on Friday‚ Moody's said: "The decision to place the rating on review for downgrade was prompted by a series of recent developments which suggest that SA's economic and fiscal challenges are more pronounced than Moody's had previously assumed".

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