South Africa’s economic growth prediction lowered

South Africa’s economic growth prediction lowered

Ratings agency Standard & Poor’s maintained its BBB- for the country’s economy and warns political instability could derail future growth.

Summary:

  • South Africa’s economic growth forecast was lowered by 1% by ratings agency Standard & Poor’s as it maintained its BBB- rating
  • The country has been warned that comprehensive economic reforms must be implemented in order to avoid a downgrade in December
  • Many South African investors have begun moving their money out of the country in search of rand-hedging international assets

It’s narrowly avoided a downgrade to junk status, but South Africa has been warned that its economy remains highly vulnerable.

Ratings agency Standard and Poor’s (S&P) maintained its rating of BBB-, but has advised the country’s leaders that significant economic reforms must be implemented if it is to avoid a downgrade in December.

S&P lowered South Africa’s economic growth estimate from 1.6% to 0.6% following a 12-month period which has seen a stark depreciation in the value of the rand, rising inflation and a low demand for the country’s exports.

And S&P has also highlighted the threat of political volatility in the future growth of South Africa’s economy.

Gardner Rusike from S&P’s Africa commented: “The potential impact of increasing political tensions within the ruling ANC and within government can potentially derail policy implementation and the reform endeavours that have been intensified since the beginning of this year.”

The country now must await a review by Fitch, which will give its latest economic review on Wednesday (June 8th).

A weakening rand and economic uncertainty has prompted many of South Africa’s investors to rethink their strategies. Many have already begun to move their money overseas, buying rand-hedging assets such as UK property.

Select Property Group has seen a 200% in its number of South African-based investors since 2004, attracted by UK real estate’s proven track record for growth and portfolio diversification.

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