Fitch revises economic outlook to negative, as 2018 growth recovery forecast fails to materialise
International rating agency, Fitch Ratings has revised the Outlook on Namibia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to negative from stable, and affirmed the IDR at ‘BB+’.
In a statement released on Thursday, Fitch stated that this comes after its previous expectation of a gradual growth recovery in 2018 has not materialised.
“The revision of the outlook to negative reflects Namibia’s weak growth performance and the agency’s own downward assessment of growth prospects with adverse implications for the government’s ability to stabilise the public debt trajectory,” Fitch stated.
With the medium-term outlook subdued, Fitch does not expect growth to recover to 2010-2015 average of 5.7%, due to the lack of fiscal space, sluggish outlook for activity in the region, the absence of large mining investment projects, and expectations of lasting weakness in Namibia’s export commodity prices.
“Potential growth is also held back by persistent structural bottlenecks, including low education outcomes and a business climate that is somewhat weaker than rating peers,” Fitch stressed.
The agency now expects tepid economic recovery in 2019, given the weaker starting point and persistent headwinds. Fitch forecasts GDP to grow by 0.7% in 2019 (versus their earlier forecast of 1.8%) and 2% in 2020, well below the current ‘BB’ median of 3.2%.
“The pick-up in activity will be driven by continued growth in mining, while domestic demand will slowly bottom out, lifted by a rise in public investment supported by the N$4 billion loan from the African Development Bank,” Fitch added.