With South Africa’s government’s weak performance at the local elections, ratings agency Fitch said the country risks a rise in government spending to appease voters.
A move the agency described as a ‘populist approach.
Moody’s, another ratings agency on the other hand said parallel to the possibility of increased spending, the country could see faster implementation of long-awaited reforms to bring the struggling economy back to life due to the increased competition and to garner support for the upcoming 2019 national elections.
The very same policies though could ‘require redistributive regulatory policies that might undermine economic growth, according to the agency.
This means the country’s wealth could be redistributed to citizens through less growth- orientated programmes such as welfare and tax rate increases.
The country’s economy is already in the woods with the central bank predicting the economy will record zero percent growth in 2016 and only narrowly avoid a recession.