Moody’s Ratings has projected that South Africa’s government debt could stabilise this year before gradually declining, supported by improving fiscal performance and ongoing economic reforms.
In a report released on Wednesday, the ratings agency said stronger government revenues, spending restraint, and improving funding conditions were contributing to a positive shift in the country’s fiscal outlook.
However, Moody’s noted that South Africa’s debt level, which remains above 80 per cent of Gross Domestic Product (GDP), continues to limit the government’s ability to absorb economic shocks.
The agency currently rates South Africa at Ba2 with a stable outlook.
According to the report, South Africa’s general government deficit is expected to narrow to 4.3 per cent of GDP in 2026 and further to 3.8 per cent in 2027, compared to 4.5 per cent recorded in 2025.
Moody’s also forecast that the country’s primary surplus would rise to 1.8 per cent of GDP by 2027, exceeding the estimated 1.5 per cent threshold required to stabilise debt levels.
The agency estimated that South Africa’s general government debt peaked at 86.8 per cent of GDP in 2025 and is projected to gradually decline to 84.9 per cent by 2028.
Despite the improvement, Moody’s pointed out that interest payments remained elevated, accounting for 18.8 per cent of government revenue in 2025, a level it described as weaker than many countries with similar credit ratings.
The report also highlighted the country’s move toward a lower inflation target of 3 per cent, with a one percentage point tolerance band, noting that the policy could help reduce risk premiums and lower borrowing costs over time.
On economic growth, Moody’s expects real GDP growth in South Africa to improve gradually to around 2 per cent by 2028 from 0.5 per cent recorded in 2024.
The agency attributed the expected growth to increased investment activity and resilient consumer spending.
It added that continued reforms in critical sectors such as electricity, logistics, and water infrastructure could further strengthen medium-term growth prospects and attract more private sector investment.
Moody’s also noted that South Africa’s 2027 to 2029 electoral cycle could test the durability of ongoing reforms, although the likelihood of a major policy reversal remains limited.
According to the ratings agency, its baseline expectation is for the Government of National Unity to remain intact throughout its term, with the African National Congress and the Democratic Alliance expected to maintain political stability ahead of the 2029 general election.
