By Ovunc Kutlu
NEW YORK (AA) - Moody's affirmed South Africa's credit rating at "Baa3" but changed its outlook to stable from negative, the credit rating agency announced on Friday.
Confirmation of the rating shows that South Africa's institutions are strengthening with a more transparent and predictable policy framework, Moody's said in a statement.
"The recovery of the country's institutions will, if sustained, gradually support a corresponding recovery in its economy, along with a stabilization of fiscal strength," it added.
The rating agency said there are improvements in economic growth and growth prospects, in addition to adoption of fiscal plans that are aimed to reduce the high debt levels.
"Marshalled and developed by strong institutions pursuing an effective set of reforms and policies, South Africa's economy has significant growth potential," Moody's said in its reason to change the outlook.
However, if the government's capacity to support growth and debt reduction would falter, the ratings would be placed on negative outlook or downgraded, the agency warned.
If, on the other hand, structural reforms are successfully implemented to raise potential growth and reduce the debt burden, then South Africa's rating would be revised up, Moody's said.