The rand reached a record low of R19.03 against the US dollar on Friday after Fitch downgraded South Africa’s credit rating another notch.
Fitch lowered the country’s long-term foreign currency debt from BB+ to BB with a negative outlook, because of a “lack of a clear path towards government debt stabilisation” and the impact of the Covid-19 pandemic.
“The negative outlook reflects the prospect of further significant upside pressure on government debt and additional downside risks associated with the global shock,” Fitch said.
The rand is now nearly 40% weaker than at the same point last year. It has been sliding since Moody’s downgraded the country’s credit rating to junk status last week and is expected to sink through the R20 per US dollar mark soon.
Fitch forecasts South Africa’s GDP to contract by 3.8 percent in 2020 due to the coronavirus crisis and the recession which the country slipped into in the final quarter of 2019.
Africa’s most industrialised country is only expected to moderately recover by 1.7 percent in 2021.
Last week Moody’s downgraded the government’s debt to junk status citing a “continuing deterioration in fiscal strength and structurally very weak growth”.
The latest downgrade came as the country observed its eighth day of a nationwide lockdown aimed at curbing the spread of the novel coronavirus.
The tally in Africa’s worst-affected country now stands at 1,505 infections with seven deaths.
The “government is seized with addressing and minimising the impact of Covid-19, implementing measures to improve economic growth and setting government finances on a sustainable trajectory,” Finance Minister Tito Mboweni said in a statement.
South Africa has posted its weakest growth rates ever in the past five years — never exceeding 1.3 percent and in some years falling below one percent.
(Compiled by Carina Koen.)