The COVID-19 pandemic has struck South Africa at a time of very weak growth and fiscal pressures. GDP growth has taken a big hit due to strict lockdowns and markedly weaker external demand. We lowered our foreign currency ratings on South Africa to 'BB-' from 'BB' on April 29, 2020. The stable outlook reflects the balance between pressures relating to very low GDP growth and high fiscal deficits, and the sovereign's deep financial markets and monetary flexibility. We anticipate that the banking sector will contract due to the economic crisis, and forecast that credit to the private sector will shrink by about 5% in 2020. We expect that the banking sector's credit losses will rise to about 1.2% in 2020, mostly stemming from defaults on retail and small-to-midsize-enterprise loans. Nevertheless, the South African Reserve Bank's liquidity measures will ensure the stability of the financial and banking sectors. We lowered our ratings on top-tier South African banks to 'BB-' in early May 2020, but their stand-alone credit profiles remain at 'bbb-'.