South Africa's credit rating is not in any immediate danger despite worsening economic indicators but it must tackle a credit growth boom that has exacerbated its current account gap, Fitch analysts said.

Fitch rates South Africa at “BBB+” with a stable outlook, on par with Hungary, Poland and Russia. While inflation and the current account have deteriorated in recent months, Fitch said recent rate rises may help alleviate those negative developments.

“The current account deficit is a symptom of the rapid lending growth but interest rates are now rising and adjustment should take place,” Richard Fox, head of Middle East and Africa sovereign ratings at Fitch in London, said yesterday.

Rapid credit growth, signs of a property and equity bubble and an appreciating currency, all together, had last year signalled rising risks to the banking sector, he said.

Private sector credit demand which is driving the spending boom, rose by 23.89 percent in the year to end-June.

“House prices are still rising but the pace of increase has come down. We still have concerns on the bank systemic risk situation but it's not something we are overly concerned about in terms of the rating,”Fox added.

A series of interest rate cuts from 2003-2005 stoked a spending boom in South Africa that fuelled healthy economic growth but has also swelled the current account gap to over 6 percent of gross domestic product.

Rising oil prices are causing inflationary pressures with June wholesale price growth jumping to a 3-1/2 year record. While rand strength in the past was a mitigating factor, the currency has weakened over 7 percent since the start of 2006.