JOHANNESBURG, June 9 (Xinhua) -- Rating agency Moody's downgraded South Africa's credit rating on Friday to one level above junk status with a negative outlook.
Moody's is the only major ratings agency that keeps South Africa's investment grade status. The agency lowered the country by one notch from Baa2 to Baa3, citing the weakening of South Africa's institutional framework.
Moody's also raised their concerns about policy uncertainty, slower progress with structural reforms, and the continued erosion of fiscal strength due to rising public debt and contingent liabilities.
"The Baa3 rating recognizes a number of important strengths that continue to support South Africa's creditworthiness," Moody's said in a statement.
"However, the negative outlook reflects the continued downside risks for growth and fiscal consolidation associated with the political outlook," it added.
"Over the medium-term, economic and fiscal strength will remain sensitive to investor confidence and hence uncertainty surrounding political developments, including prospects for structural reforms intended to raise potential growth and flexibility in fiscal expenditures," it said.
The ratings agency warned South Afrcia in April that it was on ratings review after President Jacob Zuma's unexpected cabinet reshuffle on March 31.
South Africa has entered into a technical recession for the first time after the financial crisis in 2008 as GDP contracted 0.7 percent for the first quarter in 2017, according to the data released by Statistics South Africa (Stats SA) on Tuesday.
This followed unfavourable unemployment figures, estimating that 9.3 million people in South Africa want to work, but can't find a job.
Stats SA said that unemployment in its broad definition increased in the first quarter of 2017 to 36.4 percent from 35.6 percent in the fourth quarter of 2016.
