LAGOS — Moody’s Ratings on Friday upgraded South Africa’s sovereign outlook from stable to positive, making it the only G20 nation with a positive trajectory amid a global wave of downgrades.
The agency affirmed the country’s long-term issuer rating at Ba2, two notches below investment grade, citing robust fiscal consolidation and steady progress on structural economic reforms.
Moody’s expects South Africa’s general government debt to peak at 87% of GDP in 2025 before declining to 85% by 2028, reversing years of fiscal deterioration.
Driven by disciplined expenditure control, the primary budget surplus is projected to reach 1% of GDP for the fiscal year ending March 2026 and expand to 2% by 2028.
Concurrently, accelerating structural reforms in electricity and logistics are expected to lift real GDP growth to 2% by 2028, a significant increase from the 0.8% average seen since 2023.
“The positive outlook reflects the growing likelihood that South Africa’s fiscal performance and economic growth will continue to improve,” Moody’s lead analyst stated in the official ratings release.
The National Treasury welcomed the announcement, noting it validates ongoing efforts to stabilize public finances and implement the energy and transport sector turnarounds under Operation Vulindlela.
The rating action provides a major sentiment boost, arriving shortly after South Africa’s highly anticipated exit from the Financial Action Task Force (FATF) global financial grey list.
However, the agency lowered near-term growth forecasts for 2026 and 2027 by 20 to 50 basis points due to geopolitical conflicts fueling inflation via global fuel shocks.
Despite the positive outlook, structural challenges persist, as South Africa’s debt-service costs still consume nearly 19% of government revenue, a figure significantly higher than its peer economies.
