Fitch Gives Namibia Stable Outlook

FITCH Ratings has affirmed Namibia’s long-term foreign and local currency issuer default ratings at BBB- and BBB, respectively. The outlooks are stable, Fitch said.

The country ceiling has been affirmed at ‘A-‘ and the short term foreign currency at F3.

Fitch said Namibia’s BBB- ratings primarily reflect steady growth, supported by a stable political and economic environment.

“The sovereign’s balance sheet is g. Government debt (25% of GDP in 2013) is well below the BBB peers’ median (40%),” Fitch said.

Fitch said recent high budget and current account deficits have highlighted the dependence of the economy on South African Customs Union receipts (SACU) and the exposure to a few volatile commodities.

Fitch expects GDP growth will be 4,8% in 2014 and 5% in 2015 from 4,4% in 2013, supported by continuing fiscal expansion, on-going public and private investments and recovery in the mining sector given a ger external environment.

Fitch said the main risks to the forecasts are lower than expected demand for Namibia’s key mineral exports, uranium and diamonds. In the longer term, the economy should benefit from reforms to develop infrastructure and new sectors, consistent with the new industrialisation policy, which was approved in 2013.

In fiscal year 201314, the deficit increased to negative 2% of GDP, from 0% of GDP in 2013, reflecting an increase in current expenditures and high capital spending in line with the strategy to support the domestic economy.

“Fitch forecasts the budget deficit will increase to 3,5% of GDP by 2016, primarily as a result of SACU volatility. Grants will gradually decline reflecting Namibia’s status as an upper middle income economy,” said Fitch.

The increase in public debt was limited in 2014, at 24,6% of GDP from 24,4% in 2013, as part of the deficit was financed using government deposits, 5,8% of GDP at the end of 2013 from 7,4% at the end of 2012. The depreciation of the currency by 23% against the US dollar in 2013, negatively affected external debt. Public debt is forecast to continue increasing, reaching 27% of GDP in 2016, although it will remain below the 35% government debt ceiling.

After a few years of accommodative public policies and high investment, the level of foreign reserves was US$1,5billion at the end of 2013.

Source : The Namibian