Moody's has revised its outlook for South Africa to positive from stable while affirming the nation's long-term issuer and senior unsecured ratings in both domestic and foreign currency at Ba2. The agency attributes the outlook change to an improving fiscal performance and an ongoing commitment to structural reforms.
Fiscal trajectory and debt outlook
Moody's estimates that South Africa achieved a primary budget surplus of around 1% of GDP in the 2025 fiscal year ending March 2026. The rating agency projects the primary surplus will rise gradually to about 2% in 2028. It expects that, together with gradually lower debt-service costs, this fiscal tightening will help stabilise the general government debt burden in the near term and support a gradual decline to around 85% of GDP in 2028 from an estimated 87% in 2025.
Growth and confidence drivers
The firm expects that stronger investment activity and resilient household consumption will lift real GDP growth to about 2% by 2028, compared with an average of 0.8% between 2023 and 2025. Moody's cites ongoing reform progress and reduced funding costs as factors underpinning improved investor confidence. That confidence was further buoyed by South Africa's removal from the Financial Action Task Force's grey list.
At the same time, the agency adjusted downward its growth outlook for 2026 and 2027, trimming real GDP forecasts by roughly 20-50 basis points. Moody's attributes those downward revisions to the impact of the Middle East conflict on South Africa's inflation and real incomes.
Why ratings were affirmed
Despite the positive outlook, Moody's affirmed the Ba2 ratings, pointing to relatively weak fiscal and economic fundamentals and noting that improvements from reforms remain at an early stage. The agency reiterated its expectation that general government debt will moderate to 85% of GDP by 2028 but warned that such a debt burden will continue to constrain the sovereign's capacity to absorb shocks.
Moody's also highlighted that headline interest expenditure stood at around 19% of government revenue in 2025, a level the agency described as weaker than many peers with similar ratings.
Other technical details
Moody's left South Africa's country ceilings unchanged, keeping the local-currency ceiling at Baa1 and the foreign-currency ceiling at Baa2. The agency convened a rating committee on May 19, 2026 to discuss the government's rating.
Overall, Moody's view balances recent fiscal improvements and reform momentum against persistent structural weaknesses and a high debt burden, leading to a positive outlook while maintaining the current Ba2 rating level.