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South Africa faces economic uncertainty, staring at junk status

South Africa faces economic uncertainty, staring at junk status

South Africa

South Africa is facing economic uncertainty and the recent shocks to growth and inflation are exacerbating the situation.

This is according to the country’s central bank governor, Lesetja Kganyago, who added that he cannot predict an outcome of a rating review due on Friday.

Rating firm Standard & Poor’s is expected to release its rating review of Africa’s most advanced economy and analysts say that the country could be staring at a junk status.

S&P had earlier raised concerns over the country’s dismal growth and policy upheavals.

The South African rand has depreciated by 26 percent to the dollar since January 2015, while the decision by President Jacob Zuma to replace two finance ministers in four days last December, is seen as the stroke that triggered a crisis that wiped billions from the country’s markets.

However, Pravin Gordhan, the finance minister believes that South Africa’s government has done enough to prevent its credit rating from being downgraded to junk status.

“I think we’ve done enough to pass the June hurdle,” Gordhan said in an interview with Bloomberg TV.

“I’m confident we have the space to get things done. We’re sometimes a noisy democracy but we are allowed to do what we need to do,” he added.

The South African Reserve Bank left its key lending rate at 7 percent this month, while inflation stood at 6.2 percent in April.

A severe drought that has affected most economies in the Southern Africa region has triggered higher inflation while affecting business and consumer confidence. Unemployment in the country in the first quarter in 2016 was up at 26.7 percent, according to statistics.

The central bank governor says inflation is expected to persist above the top end of 3-6 percent target band until late 2016.

The country’s economic performance will be in focus before local government elections in August, which are expected to be a tough test for the ruling ANC party.

Reuters/ Press Agencies