March 6, 2018 / 3:43 PM / 10 months ago

UPDATE 1-South Africa's rand and bonds strengthen on economic growth

* GDP grew 3.1 percent in Q4 2017

* Focus on Moody’s rating decision

* Tiger Brands shares recover (Updates levels)

JOHANNESBURG, March 6 (Reuters) - South Africa’s rand and government bonds firmed on Tuesday after data showed the economy expanded more than expected at the end of last year, while stocks also ended the session higher as food company Tiger Brands recovered from three-month lows.

The rand was up 0.7 percent at 11.7575 per dollar at 1518 GMT, having touched a session high of 11.7100.

In fixed income, the yield for the benchmark government bond fell by 9.5 basis points to 8.11 percent, reflecting firmer bond prices.

“South African fourth-quarter GDP figures were better than even our own above-consensus forecast,” Capital Economics Africa economist John Ashbourne said in a note. “We expect that the economy will retain momentum in the coming quarters and beat consensus expectations in 2018.”

Helped by growth in farming and trade, the economy expanded by 3.1 percent in the last three months of 2017, beating market expectations of a 1.8 percent expansion after 2.3 percent growth in the third quarter.

Economists said the positive growth boosted South Africa’s chances of avoiding a potentially debilitating credit rating downgrade by Moody’s this month.

Moody’s - the only major agency that still ranks South African debt as investment grade - is due to publish its rating decision this month after placing the country on review for a downgrade. S&P Global Ratings and Fitch already rate South African debt as “junk”.

A downgrade to sub-investment grade by Moody’s could see South African debt lose its place in Citi’s World Government Bond Index, the biggest of the global benchmarks and tracked by $2 trillion to $3 trillion of funds.

On the stock market, the Top-40 index rose 2.4 percent to 52,257 points while the broader all-share index finished 2.3 percent up at 59,242.

Tiger Brands’ shares rose 2.5 percent to 403 rand, having hit a three-month low on Monday after it recalled products produced by its Enterprise unit after the source of a listeria outbreak that has killed 180 people was traced to its manufacturing facility. (Reporting by Olivia Kumwenda-Mtambo Editing by David Goodman)

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