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Fitch Ratings signalled that it may upgrade South Africa's credit outlook if the government sticks to its path to stabilise debt as outlined in its three-year budget plan.

"It could be positive for the sovereign's rating if debt does follow the path projected by the government," Fitch said in a statement on Monday, while cautioning that the budget forecasts are optimistic.

The National Treasury last week projected that state debt would peak at 75.5% of gross domestic product in the year through March 2026, slightly higher than its February projection. In contrast, Fitch expects the debt-to-GDP ratio to rise in the next few years, reaching 76.9% in the 12 months through March 2027.

"Our debt forecast is higher than that of the government," partly because it incorporates assumptions of transfers to struggling state-owned logistics company, Transnet the ratings company said.

Fitch also said it may revise the nation's credit outlook if the government's efforts to rein in debt improve as a result of Africa's largest economy performing better than anticipated.

"If we become more confident that South Africa's medium-term growth outlook will improve sufficiently to reduce challenges associated with fiscal consolidation, this could also be positive for the rating," it said.

The Treasury revised its average growth forecasts in the budget update upwards to 1.8% over the next three years, from 1.6% projected in February, because of more stable energy supply and an anticipated increase in infrastructure investment. GDP has expanded by an average of less than 1% over the past decade.

Fitch affirmed South Africa at three levels below investment grade with a stable outlook in September.

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