10 August 2011
The National Treasury and the Reserve Bank, while closely monitoring the effects of the US credit downgrade and Europe’s sovereign debt crisis, have expressed confidence in South Africa’s economy and financial markets.
Finance Minister Pravin Gordhan, Reserve Bank Governor Gill Marcus and members of the Financial Stability Oversight Committee held talks on Monday following news of the US credit rating downgrade.
On Friday, for the first time in history, rating agency Standard & Poor’s downgraded the US from the highest possible rating of AAA to AA+.
“South Africa has deep and liquid financial markets which continue to function even during this difficult time of global financial turmoil,” Gordhan and Marcus said in a joint statement.
“All rating agencies rate South Africa at an investment grade. Standard and Poor’s, in particular, affirmed South Africa’s sovereign rating and even revised the rating outlook from negative to stable, citing the country’s sound economic management.
“Our financial system remains strong, with adequately capitalised financial institutions, supported by a robust regulatory framework,” Gordhan and Marcus said.
“The National Treasury and the Reserve Bank will continue to actively monitor the situation to mitigate any financial stability risks and any adverse short-term and long-term effects on the broader economy.”
South Africa, as a member of the G20, would remain in close contact with other member countries ready to take action to ensure stability and liquidity in financial markets.
“In the long term, South Africa notes the need for bold global economic leadership, especially in dealing with global financial imbalances.”
Gordhan and Marcus said they remained confident in South Africa’s growth forecast and fiscal projections outlined during the 2011/12 Budget. Tabling the Budget in February, Gordhan said SA’s gross domestic product (GDP) growth was projected at 3.4 percent this year, rising to 4.1 percent next year.
The forecast will be updated in October when he tables the country’s medium term budget policy statement.
The government would “continue to implement measures to accelerate economic growth and stimulate faster job creation,” the statement read.