Fitch Downgrades South Africa After Platinum Strike Continues

Credit ratings agency Fitch has warned South Africa that its credit rating may be lowered following a five-month platinum strike in the country.

Fitch changed the country’s outlook from stable to negative, citing poor economic prospects and rising public debt.

Its economy contracted by 0.6% in the first quarter, in part because of a fall in platinum production.

However, unions said a platinum miners’ wage deal was on the horizon.

A negative outlook can indicate that a country’s credit rating could be downgraded. A downgrade can influence a country’s borrowing costs, as some investors are restricted from lending to borrowers that do not have a high rating.

The economic contraction in South Africa in the first quarter “partly reflects the long strike in the platinum sector, but manufacturing output also fell sharply”, Fitch said.

“Following its election victory in May with 62% of the vote, the African National Congress government faces a challenging task to raise the country’s growth rate and improve social conditions, which has been made more difficult by the weaker growth performance and deteriorating trends in governance and corruption,” the firm added.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza