Treasury, Res Bank to monitor impact of US downgrade

Monday, August 8, 2011

Pretoria - National Treasury and the Reserve Bank will monitor the possible impact of the downgrading of the US and sovereign debt crisis is Europe on the South African economy.

Finance Minister Pravin Gordhan, Reserve Bank Governor Gill Marcus and members of the Financial Stability Oversight Committee on Monday held talks following news that the US' credit rating has been downgraded. The meeting discussed the impact the news has on South Africa's financial stability.

On Friday, rating agency Standard & Poor downgraded the US credit rating, down from the highest possible rating (AAA) to AA+, for the first time in history.

"South Africa has deep and liquid financial markets which continue to function even during this difficult time of global financial turmoil. 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," said the Minister and Governor in a joint statement.

It said the rating given to South Africa is a testimony of sound economic management.

"Our financial system remains strong, with adequately capitalised financial institutions, supported by a robust regulatory framework. 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, will 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. We remain confident in the growth forecast and fiscal projections outlined at the time of the Budget."

Tabling the budget in February, Gordhan said Gross Domestic Product (GDP) 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 Medium Term Budget Policy Statement.

"Government will continue to implement measures to accelerate economic growth and stimulate faster job creation," they said.