Fitch affirms local ratings

Fitch Ratings recently affirmed Namibia’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘BBB-’ and ‘BBB’, respectively, with Stable Outlooks. The issue ratings on Namibia’s senior unsecured foreign and local currency bonds were also affirmed at ‘BBB-’ and ‘BBB’, respectively it announced in a statement recently.
Namibia’s ‘BBB-’ rating balances strong and sustained levels of economic growth, a relatively low public debt load and a high level of political stability, against large fiscal and external deficits.
Namibia has a sizeable general government deficit, which Fitch estimated at 6% of GDP in fiscal year 2015/16, similar to the 6.1% shortfall in Financial Year 2014.
“General government debt is moderate at an estimated 35.1% of Gross Domestic Product at end-2015, but had risen sharply from 22.2% at end-2014. However, this partly reflects the issuance of a Eurobond in October 2015, part of which is pre-financing for Financial Year 2016, and the consequent build up in government deposits to an estimated 10.9% of GDP at end-2015, as well as the effect of exchange rate depreciation on foreign currency debt. The level of public debt/GDP remains well below the ‘BBB’ median of 43%,” Fitch said.
Noted Fitch, “Namibia’s economic growth performance and prospects are robust. Real GDP growth held up well at an estimated 4.8% in 2015, despite the impact of a regional drought and weakness in South Africa, its main trading partner.
The large current account deficit is a significant rating weakness. It widened to an estimated 14.9% of GDP in 2015, from 11.2% in 2014, due to lower prices for many of Namibia’s main commodity exports, as well as robust import growth, partly reflecting strong capital goods imports to develop the country’s mining sector.
From 2016, these trends will start to reverse, as new capacity in the mining sector increases exports, and lower capital goods demand and higher domestic interest rates curtail import growth,” Fitch said.
Fitch forecasted the current account deficit narrowing to 11.8% of GDP in 2016 and 6.4% in 2017.
Credit growth has been strong in recent years, supporting economic growth but also creating potential risks, particularly in the housing market. House prices have risen by 93% in the past five years, due to easier credit availability and constrained supply, and a large correction would entail risks for the banking sector.

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