Ratings agency Fitch raised South Africa's outlook to stable from negative on Monday, saying its recovery in 2010 after a recession the year before had outpaced expectations.

Fitch said in a statement it expected real GDP growth to have recovered to 2.8 percent in 2010 after Africa's largest economy contracted in 2009, adding it had emerged with its credit fundamentals in line with, or slightly better than peers.

South Africa's post-global crisis adjustment process has been smoother than originally thought, said Veronica Kalema, director in Fitch's Sovereign Group.

After falling 1.7 percent in 2009, Fitch expects real GDP growth to have recovered to 2.8 percent in 2010. The recovery is slightly faster than originally projected by the government and has aided fiscal consolidation.

The agency affirmed South Africa's long-term foreign currency issuer default ratings at 'BBB+', its long-term local IDR at 'A' and short-term foreign currency IDR at 'F2'.

The National Treasury revised 2010 growth forecasts upwards to 3.0 percent last October from the 2.3 percent seen in February, after Africa's biggest economy suffered its first recession in nearly two decades in 2009.

Standard Chartered analyst Razia Khan said while a measure of political risk posed a constraint on the rating, a strong currency and a gradual improvement in foreign exchange reserves worked in South Africa's favour.

Most factors support its rating (including) low inflation, a strong policy framework that supports central bank independence and a history of fiscal conservatism, said Khan, regional head of research for Africa at the bank.

Ratings agency Moody's said in March last year South Africa's credit ratings looked safe for the medium term but might come under threat if the government gave ground to its allies on the left and adopted looser economic policies.

Fitch in its Monday statement said that spending by power utility Eskom and logistics group Transnet would continue to provide economic stimulus for the country.

The ability of local capital markets to finance wider deficits with relative ease emphasises a key rating strength of South Africa, it said.