FTAdviser.com

Advertising

Remy Salter, credit analyst at S&P, said: “The outlook revision reflects pressures on South Africa’s balance of payments, which increase the risk of further currency depreciation and a sharper-than-anticipated correction in the current account deficit.”

This, he said, will have an effect on prospects for trend growth.

According to Bryan Collings, managing partner at Hexam Capital, S&P’s decision to revise its outlook is “completely understandable”.

He said: “South Africa is not in a great fundamental position, as it is still a commodity-orientated country. Although it is in a better position now than it was in 1998, relatively speaking, it will face headwind over the next few years.

“However, this decision is reactionary because there are no serious problems that would result in capital flight.”

Stuart Thomson, fixed income fund manager at Resolution Asset Management, said: “This decision does not surprise me, as emerging markets are most vulnerable to a credit crunch. An economy such as South Africa’s, whose main base is in commodities, is very vulnerable.”

With the global economy set to experience its first simultaneous recession since the end of the World War II, Mr Thomson said he foresaw a further downgrading of South Africa’s outlook because the credit crunch is predicted to persist through next year.