South Africa’s improving economic prospects after years of lackluster growth will result in better fiscal metrics and may soon lead to an upgrade of its junk-rated debt, according to RMB Morgan Stanley.

Positive sentiment in the continent’s most industrialised economy has built up since the African National Congress formed a governing coalition with business-friendly parties after losing its parliamentary majority for the first time since 1994 in the May 29 election.

Reforms undertaken by Cyril Ramaphosa during his first term as president have also boosted the outlook and triggered a wave of investment by multinationals as well as rallies in the rand, bonds and the benchmark stock index.

“South Africa stands out as the fastest-improving fiscal story” across Morgan Stanley’s emerging-market scope of coverage when measuring for fiscal-risk premia, Andrea Masia, an economist at its Johannesburg-based unit, said in a note.

RMB Morgan Stanley expects a budget update on Wednesday to confirm a primary surplus in the year through March 2024, and the positive balance to grow from an estimated 0.3% of gross domestic product to 0.7% of GDP in the current period. It also sees government debt stabilising at around 74% of GDP over the medium term.

“Improving growth dynamics, which feed into better fiscal metrics and a stabilisation in debt, may drive expectations of a sovereign credit-rating upgrade in the coming review period,” Masia said. While South Africa’s debt levels are still higher than nations that also have a BB credit rating, “the direction of travel is clearly positive and may support the case for an outlook change to positive from some agencies,” he said.

The nation obtained a full house of junk ratings in 2020 when Moody’s Ratings downgraded South Africa, leaving it without an investment-grade assessment for the first time in 25 years.

That’s as the country’s fiscal decline accelerated after loss-making state-owned companies including Eskom and South African Airways received a series of bailouts, officials repeatedly failed to rein in public-sector wages and graft scandals marred Former President Jacob Zuma’s nine-year rule.

S&P Global Ratings is scheduled to publish a sovereign credit-rating review November 15, though it doesn’t have to stick to that date. Fitch Ratings and Moody’s may give updates after this week’s budget.