Within six months of their last review, Fitch has changed their outlook of the Namibian Economy from “Stable” to “Negative” as recessionary pressures remain rife across the country.
Giving the reasons for the negative ratings Fitch underlined that the revision of the Outlook to Negative reflects Namibia’s weak growth performance and downward assessment of growth prospects with adverse implications for the government’s ability to stabilise the public debt trajectory.
The agency stated that Namibia’s net external debt will continue to rise, to 25% of GDP in 2020 from 11.8% in 2015.
Fitch further noted that the economy is yet to rebound from the downturn that followed the 2010-2015 mining and construction boom.
“Our previous expectation of a gradual growth recovery in 2018 has not materialised. GDP declined for the 10th consecutive quarter in 3Q18, and Fitch now expects it to have contracted by 0.4% in 2018 versus our earlier forecast of 0.6% growth, following a 0.9% fall in 2017. The contraction reflects weak domestic demand, due mostly to fiscal consolidation, lower private investment and soft disposable income growth, as well as sluggish activity in neighbouring South Africa and Angola. This was only partly offset by robust activity in mining mostly due to the ramping-up of the Husab mega-mine’s production of uranium,” the US based rating agency noted.
At “BB+”, Fitch expects the economy to rebound gradually in 2019 to 0.7% from a projected decline of -0.4% In 2018. Mining output and increased expenditure supported by the African Development Bank loan, will likely spur growth in the medium term amidst global economic slowdown and sluggish regional performance.
Offering commentary on the new negative outlook, Economic Analyst at FNB Namibia, Daniel Kavishe stated that with the Government’s budget deficit expected to widen to 4.1% by 2020/2021, Fitch remains concerned of transfers to loss making SOEs and high public-sector payroll costs.
“All in all, it is unlikely that the country rating will improve in the near term unless drastic changes are made to create policy stability and a competitive investment environment. As social deficits widen, Government will have to pronounce its self on key legislature related to land reform, equitable economic empowerment and public-sector governance to reignite investor confidence.” Kavishe said.
He further detailed that the proposed tax amendments which are intended to increase revenue, will likely detract from the pace of economic recovery.
“Quick wins for the country will therefore be clarity on policy front, reigning-in government debt and transformation of governance at state owned entities. Through the improvement of local business environment, Namibia will be set on a sustainable and steady path of economic recovery that entices both domestic and foreign investments,” Kavishe advised.
The Finance Minister, Calle Schlettwein, still optimistic, “Considering the tightness domestically, regionally and globally not too bad an outcome. Several indicators strengthened compared to last year.”