A lacklustre 2016, which saw South African GDP shrink by 0.3%, has been followed by a series of political own goals in 2017. The disastrous cabinet reshuffle, which culminated with the axing of finance minister Pravin Gordhan, ended with the inevitable rating downgrades. Days after the dismissal of Gordhan, both Fitch and Standard & Poor’s downgraded South Africa’s credit rating to BB+, a non-investment grade, which may have severe implications for the South African economy.
The short-term impacts of this have already resulted in an increase in public borrowing costs, and the pressure on public funds is magnified by lower than projected GDP growth. In the medium to long term, a number of other scenarios may play out, including further increased borrowing costs and currency impacts.
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