South Africa Faces Another Setback with Low Business Confidence Index

South Africa Faces Another Setback with Low Business Confidence Index

Moody’s Investor Service recently downgraded South Africa in its ratings review. A latest survey indicating lower business confidence will be another major setback for South Africa after political turmoil the country is already facing. South African economy slipped into recession as the recent economic and manufacturing reported decline in revenue. Business confidence dropped to levels not seen since year 2009 in South Africa.

The economy has been growing at a steady pace but political issues can easily lead to decline in confidence among business owners. South African politicians will have to work hard to bring back confidence. The country also suffered as major ratings agencies reduced their ratings for the country. In its outlook published on June 9, Moody’s Investor Service lowered the ranking for South Africa to the lowest level in the investment grade.

S&P Global Ratings and Fitch Ratings have already termed South Africa as ‘junk’ in terms of investor rankings.

In a recently published research note, Moody's senior analyst Zuzana Brixiova said, “Reduced business confidence implies reduced investment, which would negatively affect growth in South Africa’s already-weak economy, and will ultimately make fiscal consolidation more challenging.”

Finance Minister Malusi Gigaba said on Thursday the Treasury was looking for ways to cut government spending further and reallocate funds to help boost growth while maintaining its fiscal target.

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