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S&P in May upgraded its outlook to positive from stable, citing an improved fiscal trajectory.
“Higher-than-expected government revenue has supported the fiscal position this year, but fiscal pressures remain,” the ratings agency said.
In the country’s mid-term budget statement delivered in October, the National Treasury said South Africa’s budget deficit would shrink more quickly than before, with debt stabilising at a lower level.
Although power and logistical bottlenecks continue to weigh on the South African economy, S&P expects that government measures to increase private sector activity and reform some key government-related enterprises could support stronger growth outcomes over the next two to three years.
South Africa suffered a sharp economic contraction during the COVID-19 pandemic, but its recovery has been supported in the past two years by a commodities windfall that has boosted government revenue.
On Friday, S&P also affirmed its “BB-/B” foreign currency as well as “BB/B” local currency ratings on South Africa, which has not been investment grade since 2020.
