Tuesday, 07 April 2020

The ratings downgrade

  • Year: 2020
  • Author(s): Neva Makgetla (TIPS)

The economic effects of Moody’s recent credit ratings downgrade have been overtaken by the whirlwind effects of the COVID-19 crisis. It is, however, also important to understand the likely effects of the downgrade, which vary for different sectors and stakeholders,  to ensure a reasoned response. This policy brief looks at the economic impacts of the decision. It also considers the policy implications. While the ratings agencies have indicated that changes in economic policies and practices could reverse the downgrade, these policy demands on South Africa are contradictory. They suggest that, to improve its credit rating, South Africa must reduce worker protections, limit land reform, and cut government spending. However, these measures would all in turn aggravate social inequalities and policy contestation, increasing investor uncertainty and risks over the long run.

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