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.
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