What happens to economies when downgraded (It doesn't look good for SA)

Just days after President Jacob Zuma fired his Minister of Finance Pravin Gordhan, credit ratings agency Standard & Poor’s has downgraded South Africa to junk status.

Standard Bank Chief Economist, Goolam Ballim, explains what international economies have experienced following the downgrade, and what is likely to happen in South Africa.

Ballim says the financial system and economy is founded on trust, and President Jacob Zuma has broken it by removing Pravin Gordhan as Finance Minister.

He says new Finance Minister Malusi Gigaba is "given a role that is far greater than his shoulders can bear".

Economies slip into recession shortly after downgrade.

Goolam Ballim, chief economist at Standard Bank

Growth trajectory over the near term typically slipped by 2% each points.

Goolam Ballim, chief economist at Standard Bank

Job shedding increases. Those who were able to retain their jobs experienced slower income growth. It effectively meant over the near to medium term slower income growth resulted in weaker wealth generation.

Goolam Ballim, chief economist at Standard Bank

Over time wealth creation, whether through pension fund or investment in the stock market directly, people in South Africa are going to be poor.

Goolam Ballim, chief economist at Standard Bank

Listen to the audio below for more analysis...

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