JOHANNESBURG, May 21 (Reuters) – Credit rating agencies S&P Global Ratings and Fitch affirmed South Africa’s sovereign rating and outlook on Friday, citing an upturn in near-term economic performance and improved public finances.

The public finances of Africa’s most industrialised nation were in bad shape before the COVID-19 pandemic struck last year and have worsened since, with gross debt predicted to exceed 87% of GDP in 2024 from roughly 80% now.

But in the 2021 budget presented in February, the National Treasury took steps to try to avoid a debt spiral, including by continuing with efforts to contain the public sector wage bill.

On Friday S&P affirmed South Africa’s long-term foreign-currency rating of BB-, or three notches below the investment grade. It kept the country’s local currency debt at BB, both with a stable outlook.

Fitch also affirmed South Africa’s long term foreign and local currency debt ratings to ‘BB-‘ from ‘BB’, on Friday with a negative outlook.

Moody’s also rank South Africa’s debt junk.

Fitch said public finances have improved substantially due to strong fiscal revenue, relative to the last review but remain a rating weakness as the government’s fiscal consolidation plan relies heavily on containing public sector wages.

S&P said following a contraction of 7% in 2020, it expects South Africa’s economic growth to rebound to 3.6% this year, before moderating to 2.5% in 2022 and below 2% in 2023-2024.

Fitch forecasted growth of 4.3% in 2021 and 2.5% in 2022.

“We also expect South Africa to post a second successive annual current account surplus this year, as commodity prices are relatively high and imports are recovering moderately,” S&P said.

S&P also warned that structural impediments are likely to continue to weigh on medium-term growth, particularly the unreliable electricity supply, weak investment expenditure and an inflexible labour market with heavy unionization across public and private sectors. (Reporting by Nqobile Dludla; Editing by David Gregorio)

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