South Africa has slipped down the economic outlook
Tag: South Africa, South Africa economic
Summary: Whoever is elected ANC leader is almost certain to be the party's nominee for the 2014 presidential election.
S&P said South Africa's near-term political pressures had eased and the Treasury remained committed to fiscal consolidation, but added problems such as high unemployment and a structural current account deficit persisted.
"The negative outlook reflects the potential for a downgrade if economic and social problems feed into the political debate in the run-up to the 2014 elections and consequently further put pressure on the policy framework," S&P said.
President Jacob Zuma faces a challenge to the leadership of his ruling ANC later this year, amid criticism his government has not done enough to tackle unemployment, a broken education system and growing corruption.
Whoever is elected ANC leader is almost certain to be the party's nominee for the 2014 presidential election.
Responding to the S&P move on Wednesday, the Treasury said political debate and a vigorous exchange of ideas on policy options "are part and parcel of the fibre of a democratic dispensation".
"This cannot be construed as political instability," it said in a statement.
The rand fell more than 1.3% against the dollar and was the worst performer in a basket of 20 emerging market currencies, partly hit by the outlook downgrade.
This is the third outlook downgrade in four months for South Africa, after Fitch cut its outlook to negative in January following a similar move from Moody's in November.
Both agencies cited political pressure as the reason for their move.