Moody’s Investors Service said that South Africa’s fiscal consolidation will be slower than the government estimates because of weak economic growth and a higher public-sector wage bill.
Moody’s sees the country’s fiscal deficit at about 4% of GDP in the year through March 2019, the company said in an emailed statement. There is 3.6% gap compared with the state’s February budget forecast.
“Growth this year is expected to be lower than the government’s own estimates, weighing on tax revenues, while the public sector wage agreement in June also brings extra, unbudgeted cost,” Moody’s said.
“Medium-term deficit targets remain within reach and, if met, will support a stabilization of debt levels.”
Moody’s affirmed the country’s debt scores at one level above junk in March, and changed the outlook to stable from negative.
Bloomberg informed that South Africa’s government reached a three-year wage agreement with its 1.3 million workers in June, with civil servants getting raises of 6% to 7% for the year through March 2019 and by as much as 1% point more than the consumer inflation rate for the following two years.