SA dodged economic bullet not downgraded to ‘junk status’

African News Agency (ANA)

SA dodged economic bullet not downgraded to ‘junk status’
A man walks past the Standard & Poor's building in New York's financial district February 5, 2013. REUTERS/Brendan McDermid

The Democratic Alliance on Friday welcomed the decision by Standard and Poor’s (S&P) to affirm South Africa’s long- and short-term foreign and local currency bond ratings at “BBB-/A-3” and “BBB+/A-2” respectively.

“The good news is South Africa has dodged an economic bullet and has not been downgraded to ‘junk status’ by Standard & Poor’s,” DA spokesman David Maynier said in a statement.

However, despite this, S&P raised serious concerns about “structural measures” which posed a risk to the investment grade credit rating, including “rising political tension”; the lack of “cohesion of the executive branch”; and “periodic disputes between government institutions” in South Africa, he said.

“That Standard & Poor’s did not downgrade us feels like a miracle given President Jacob Zuma’s protracted ‘dirty war’ against the Minister of Finance Pravin Gordhan and National Treasury.

“What we now need is for government to get behind… Gordhan and implement the structural reforms necessary to boost economic growth, reduce unemployment, and turn around ‘zombie’ state-owned enterprises, like South African Airways.

“With 8.9 million people unemployed one leading economist suggests that a sovereign ratings downgrade could trigger a recession, put 200,000 more jobs at risk, and put 600,000 more dependants at risk in South Africa.

“We dare not therefore underestimate the consequences of a sovereign ratings downgrade to ‘junk status’ – it will affect everyone and spare no one in South Africa,” Maynier said.

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SOURCEAfrican News Agency (ANA)