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Moody's give SA ratings the OK

By Staff Writer
www.timeslive.co.za: South Africa's credit ratings are safe for the time being, Moody's said in a briefing held on Tuesday, but these ratings could come threat if the government gave ground to its allies and adopted looser economic policies.

Moody's also predicted that the outlook for South Africa's A3 local and foreign currency ratings was stable and was unlikely to be revised in the next 18 to 24 months.

Kristin Lindow, Moody's senior vice-president and regional credit officer for Europe and Africa, said the administration of President Jacob Zuma had clarified economic policy direction.

"There was a lot of concern over whether [Zuma] would take the economy in a different direction. The relatively seamless transition helps to suggest that the policy stance has been continued and confirmed in a way that is very reassuring."

Relations between the ANC and its allies, Cosatu and the SA Communist Party, have been volatile over economic policy differences.

The trade union federation and the communists want the government to spend more, withdraw the Reserve Bank's mandate to hold consumer inflation at between 3% and 6%, and weaken the exchange rate.

Lindow reckons the floating exchange rate had worked and it would be difficult to target a level for the rand, which gained about 30% against the dollar last year.

"Almost no country is able to manipulate its currency ... for South Africa, being so small and so open, it would be nearly impossible," she said.

Moody's said that evidence that South Africa's economic growth potential was accelerating beyond 5% would lead to a ratings upgrade but, this was unlikely.

"We don't expect growth to resume at 5% for some time. We expect 3.5% to 4.5% growth in coming years," Lindow added.

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