Negative rating unlikely – PSG
Analysts PSG Namibia this week released their economic outlook for the year 2016 and were confident Namibia would retain its BBB Investment Grade and that the country could register growth of 4.5% for the year 2016. “As a result of our economic and political assessments, we continue to rate Namibia as Investment Grade “BBB-” with a stable outlook. While the country’s fiscal and current account balances have deteriorated in recent years, and this report reflects weaker than before projections over the medium term, there is no reason to panic. The government is able to cover its borrowing needs on the domestic and international capital markets while the current account deficit has increased external debt to a similar l and BBB – peers,” PSG said this week. “It is highly unlikely that Namibia will see negative ratings -term fundamentals are seemingly too strong for such an adverse adjustment. The mid-term fiscal budget review (presented to Parliament on November 3) made a 4.9% downward revision in expected revenue for the 2015/16 fiscal year, accompanied by an under-performance in expenditure execution. Finance Minister Calle Schlettwein also warned that Namibia will have to do with N$3bn less than it previously expected to receive from the Southern African Customs Union (SACU),” PSG said. “We applaud Mr Schlettwein for making some tough expenditure decisions leading into 2016/17. However, there should be some concern about the political will behind this move considering that a basic income grant, food banks and plans to deal with unemployed youth are now likely to be implemented in the short to medium term,” PSG said. We continue with a conservative approach regarding foreign reserve forecasts beyond 2015, cognisant of the fiscal and current account deficits pencilled into our macroeconomic outlook. As a result, the medium-term outlook for import cover continued being on the low side, albeit sufficient to support the currency peg. Said PSG, “during 2015 we expect to see a current account deficit equal to 12.3% of GDP due to the adverse impact of weaker diamond earnings in particular amidst a global economic growth slowdown. Next year will be another challenging year for Namibia considering an expected decline in SACU receipts, and we expect this to translate into a further widening of the current account deficit to nearly 17% of GDP.” “Next year will be another challenging year for Namibia considering an expected decline in SACU receipts, and we expect this to translate into a further widening of the current account deficit to nearly 17% of GDP. However, the deficit is expected to narrow over the medium to long term. Our outlook is still for GDP growth of around 4.5% year-on-year during the second half of 2015 compared to a mean of 5.3% year-on-year during the first half of the year,” PSG concluded.