Fitch affirms Namibia at ‘BB’ with negative outlook
International ratings agency, Fitch Ratings, affirmed Namibia’s Long-Term Foreign-Currency Issuer Default Rating at ‘BB’ with a negative outlook.
In a statement issued on 15 July, Fitch said the negative outlook reflects increased downward pressures on creditworthiness due to continued rise in government debt, wide deficits and low growth aggravated by the prolonged pandemic.
“It also reflects challenges to fiscal consolidation in the context of a subdued growth outlook and high inequality,” the firm stated.
Fitch noted that Namibia’s ‘BB’ rating balances high levels of fiscal deficits and debt against a strong institutional framework and a well-developed non-banking financial sector that supports the sovereign’s financing capacity.
The Namibian economy contracted by a record 8% in 2020, following stagnation since 2Q16, due to the coronavirus pandemic’s hit to global demand and disruptions to global travel and trade especially hitting the gem supply chains.
“Domestic containment measures and reallocation of public spending to Covid-19-related emergency needs also hurt other sectors like construction, retail trade and tourism,” Fitch added.
Fitch projects growth of 1.5% in 2021 amid some recovery in mining and improved global demand, but an on-going third particularly severe wave of infections poses a risk to growth given the slow vaccine rollout.
“As of 9 July 2021, 5.1% of population has received at least one dose. We expect a more broad-based rebound of over 3% in 2022 and 2023. However, medium-term growth potential is subdued at about 2%, constrained by structural factors including high transport and labour cost, lack of skilled labour and developments challenges arising from the country’s low population density,” Fitch stated.
Fitch estimates that the general government deficit rose to 11% of GDP in the fiscal year ending March 2021, with Covid-19-related spending of about 3.6% of GDP in FY20/21, including wage subsidies, emergency income grants and health and education spending.
“Policy initiatives to address high inequality such as the National Equitable Economic Empowerment Bill and land reform have generated regulatory uncertainty. However, the government has a record of striving to maintain a private sector-friendly business environment,” Fitch noted.
