By: Kelvin Chiringa
FirstRand Group economist Daniel Kavishe has expressed that the country’s bad rating is unlikely to improve in the near term unless drastic changes are made to create policy stability and a competitive investment environment.
The economist’s gloomy prediction comes as the local economy’s outlook was changed from stable to negative by ratings agency Fitch.
PSG Namibia also observes that both Fitch and Moody’s now have negative outlooks for Namibia’s credit rating while both also rate Namibia one notch below investment grade.
Namibia continues to reel with recessionary pressures which according to the FirstRand Group economist have become rife right across the country.
Says Kavishe, “As social deficits widen, government will have to pronounce itself on key legislature related to land reform, equitable economic empowerment and public-sector governance to reignite investor confidence. The proposed tax amendments which are intended to increase revenue, will likely detract from the pace of economic recovery.”
“Quick wins for the country will therefore be clarity on policy front, reigning-in government debt and transformation of governance at state owned entities. Through the improvement of local business environment, Namibia will be set on a sustainable and steady path of economic recovery that entices both domestic and foreign investments.”
Kavishe submits that aAt “BB+”, Fitch expects the economy to rebound gradually in 2019 to 0.7% from a projected decline of -0.4% In 2018.
Mining output and increased expenditure supported by the African Development Bank loan, will likely spur growth in the medium term amidst global economic slowdown and sluggish regional performance, he predicts.
“With the Government’s budget deficit expected to widen to 4.1% by 2020/2021, Fitch remains concerned of transfers to loss making SOEs and high public-sector payroll costs,” he adds.
Head of research at PSG Namibia, Eloise du Plessis also affirmed that they 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 skewed to the downside.
Her prediction is that although economic growth is expected to recover over the medium term, it will be hampered by fiscal consolidation, structural problems such as high unemployment, a large skills shortage, a lack of investment in value-added sectors and ongoing global trade tensions.
“In order to get a positive rating action, the government will have to facilitate a halt in the rise in government debt-to-GDP, a marked improvement in the country’s external balance sheet, and stronger medium-term economic growth,” she submitted.
