Fitch downgrades Namibia’s credit rating to negative
International rating agency, Fitch Ratings last week affirmed Namibia’s long term foreign currency credit rating at BB but changed the outlook to negative from stable.
The ratings agency said the negative outlook reflects the significant impact of the corona virus pandemic on Namibia’s economy and public finances.
Fitch projects the government budget deficit to widen sharply to 12.8% of GDP in the 2020 fiscal year before narrowing to 7% of GDP in the 2021 fiscal year.
The agency further expects that the government will opt to refinance part of the $500 million Eurobond principal repayment due in November 2021 through international market issuance, to avoid a sharp international reserve drawdown.
Responding to this rating, Researcher at PSG Namibia, Shelly Louw noted that the Corona Virus crisis will severely strain the government’s ability to meet rising expenditure needs and to repay external debt in coming years without taking on more debt.
She added that although economic growth is expected to recover modestly over the medium term, it will be hampered by fiscal consolidation efforts, structural problems such as high unemployment, a large skills shortage, a lack of investment in value added sectors, and ongoing global trade tensions.
“We expect that a positive rating action from either Fitch or Moody’s is unlikely in the coming 12 months and that risks to the country’s sovereign credit ratings are still skewed to the downside,” Louw said.