Nov. 6 (Bloomberg) -- The influence of labor unions on South Africa’s government may hurt the economy if it leads to government spending increases that raise the budget deficit and nation’s debt levels, according to Moody’s Investors Service.

“Pressure from the left is something we’re monitoring very closely to see what impact it has on economic policy, to see if it becomes more leftist,” Leon Claassen, general manager of Moody’s South African office, said in an interview at a conference in Cape Town today. “If it means increasing the budget deficit even more, and increasing debt levels, then obviously it’s going to have a negative impact.”

President Jacob Zuma is under mounting pressure from his labor union allies to deliver on a pledge to slash the jobless rate to 14 percent in the next five years. South Africa’s unemployment rate, the highest of 62 countries tracked by Bloomberg, jumped to 24.5 percent in the third quarter, from 23.6 percent in the second quarter.

South Africa’s rating is “stable at the moment” but is “monitored on an ongoing basis,” said Claassen. “If it requires action we’ll have to take that action.”

Moody’s asseses South Africa’s long-term foreign currency debt at A3, the debt-rating firm’s fourth-lowest investment level. Standard & Poor’s has a BBB+ sovereign rating for South Africa, the firm’s third-lowest investment-grade rank.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

Last Updated: November 6, 2009 06:28 EST