Outlook 2014

Fitch affirms SA's ratings, with stable outlook

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The decision by international ratings agency Fitch to affirm South Africa’s credit rating is fair given the tough global economic climate and the government’s commitment to its fiscal plan, the National Treasury said in a statement.

The government was responding to Fitch's affirmation of the country’s long-term foreign and local currency issuer default ratings at BBB and BBB+, respectively.

Despite being concerned about the slow pace of growth, the ratings agency said South Africa's floating exchange rate and inflation-targeting framework acted as effective "shock absorbers" in the South African economy.

Ratings on its senior unsecured foreign and local currency bonds were also affirmed at BBB and BBB+, respectively.

Fitch said the outlooks on the long-term issuer default ratings were stable. The country ceiling has been affirmed at A- and the short-term foreign currency issuer default rating at F3.

South Africa's Treasury said that South Africa's strong banking system and "deep local financial markets" were also among the factors that influenced the affirmation of the country's rating.

"The ratings agency said that government debt was largely denominated in local currency and has a high average maturity and this limited exchange rate and financing risk," the Treasury said.

"Fitch also indicated that weak economic growth and a widening current account deficit were downside drivers preventing the economy from achieving a more positive rating."

The "counter-cyclical approach" was one of the toughest decisions that the government took to survive the aftermath of the 2008 recession. It did this by allowing the budget deficit to increase during bad times, before reigning it in when times improved.

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