South Africa’s economic recovery will be slow, below Treasury estimate – Moody’s

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JOHANNESBURG (Reuters) – A recovery in South Africa’s economic growth will be slow and less than the Treasury’s estimate of 1.5 percent for 2018 following a surprise contraction in the first two quarters, ratings agency Moody’s said on Thursday.

“Growth is going to be below 1 percent, to what extent it’s difficult to say,” Lucie Villa, Moody’s lead analyst for South Africa, told the agency’s annual Sub-Saharan Africa conference, referring to this calendar year.

Villa said the rising share of government revenue that South Africa spends on debt servicing was a concern for Moody’s but that she expected some fiscal adjustment in the October budget statement.

She said two ratings strengths for South Africa was that its government debt had a long maturity and that relatively little of the debt was foreign-currency denominated.

Moody’s has said the slide into recession in the second quarter would exacerbate fiscal and monetary challenges. It said weaker-than-expected economic data was “credit negative”.

The agency is the last of the top rating agencies to have Pretoria’s long-term foreign-currency debt in investment grade.

South Africa entered recession for the first time since 2009, data showed last week, undermining President Cyril Ramaphosa’s efforts to revive the economy after years of stagnation under former president Jacob Zuma.