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Fitch affirms Namibia sovereign rating at BB+ with a stable outlook

Fitch affirms Namibia sovereign rating at BB+ with a stable outlook

Fitch Ratings (Fitch), this week announced its decision to affirm Namibia’s long-term foreign currency credit rating at sub-investment grade and kept its outlook at stable.

According to a statement released by the agency, the affirmation and the stable outlook take into consideration the government’s stated commitment to stabilise debt and fiscal reforms, as well as signs of a modest economic recovery. Fitch has cut its growth forecast for the Namibian economy to 0.8% (2.0% previously) in 2018 and 1.8% (3.0% previously) in 2019 due to a deeper-than-expected contraction in domestic demand.

This comes after Fitch downgraded Namibia’s sovereign credit rating in November 2017 from BBB-.

Regarding government policy, the rating agency said policy uncertainty has eased somewhat following Swapo’s elective conference in November 2017 and the subsequent retraction of controversial provisions of the draft National Economic Equitable Empowerment Bill (NEEEB).

“We expect a revised [NEEEB] draft bill to be submitted to parliament ahead of the 2019 presidential election. A land reform conference is scheduled to be held in October 2018 and might lead to some policy uncertainty amid calls for expropriation without compensation, a measure that is opposed by the government,” the rating agency said.

Klaus Schade, Research Associate at the Economic Association of Namibia, stressed that although Public Private Partnerships are not a solution to all infrastructure needs, a careful consideration on a project-by-project basis could reduce the burden on public coffers, reduce the risks of cost and time overruns.

“We need smart policies that balance the need to address major social challenges of poverty, inequality and unemployment with the need to remain attractive to domestic and foreign investors. This requires a continuation of the close cooperation between the public and private sector,” Schade said.

Furthermore, analysts from PSG Konsult Namibia expect that a positive rating action from either Fitch or Moody’s is unlikely in the coming 12 months and that risks to the sovereign credit rating are skewed to the downside.

“Although growth is expected to recover over the medium, it will be hampered by fiscal consolidation, structural problems such high unemployment, a large skills shortage, a lack of investment in value-added sectors as well as the ongoing global trade frictions,” PSG added.


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