By Hilary Mare
PRESIDENTIAL economic adviser Dr John Steytler is adamant that Namibia will this year avoid both the Fitch and Moody’s credit ratings downgrades that loom amid outlook downgrades late last year.
New York-based credit rating agency, Fitch Ratings, last year painted a bleak picture of the Namibian economy and downgraded the country’s economic outlook, pushing Government into announcing corrective measures to arrest the situation in its fiscal consolidation agenda.
Moody’s also revised Namibia’s outlook to negative from stable while affirming the long-term foreign and local currency issuer default ratings at ‘BBB-‘ in 2016.
Responding to Confidente this week, Dr Steytler explained that the interaction with the credit rating agencies gives Namibia an edge to rectify challenges that may cause a an affirmative downgrade.
“I think we will avoid a downgrade this year and the thing about these rating agencies is that we interact with them. They come and they tell us the things we are not doing right and that allows us to rectify the things. Namibia has been cited as one of the countries that has come up with a good fiscal consolidation plan and that should be good for us,” he said.
The drought, a drop in commodity prices and a reduction in Southern African Customs Union (SACU) revenue pool and poor economic performance by neighbouring trade partners have all been blamed for the poor rating.
“However uncertainty with the economy will remain,” added Dr Steytler.
In last year’s outlook downgrade, Fitch also revised the outlook on Namibia’s National Rating on the South African scale to Negative from Stable and affirmed the Long-Term rating at ‘AA+.
The revision of outlook to negative was reflected in Namibia’s high budget deficit which widened sharply to 8.3 percent of GDP in fiscal year 2015/16 well above the government’s 5 percent target and the worst on record. The deficit has worsened progressively from 0.1 percent in FY12 to 3.4 percent in FY13 and 6.4 percent in FY14, and is well above the ‘BBB’ category median of 2.7 percent.
The overshoot in the deficit in FY15 primarily reflected weaker-than-expected revenues from domestic sources, including company tax and lower-than-expected income tax.
However, Namibia’s ratings are supported by a track record of political stability, slightly stronger governance indicators than rated peers, a net external creditor position, financing flexibility enhanced by access to the deep South African capital markets and a liquid banking system.
“I think we might have hit the upper level of what we would want to borrow abroad and hence I think domestic borrowing provides us with an opportunity to develop the domestic market and allows for sustainable debt,” responded Steytler in relation to Government’s domestic borrowing which has seemed the direction in which Government intends to go in the medium term.
Addressing concerns of growth this year, Steytler tipped three industries to flourish this year adding that the growth prospects in 2017 look positive as far as current views are concerned.
“I think the agricultural sector will do well this year although it only contributes about four percent to the GDP. I am also very optimistic about the mining sector from readings of commodity prices. The other sector we must watch closely is the tourism sector. The industry is picking up and arrival statistics also support this view. Overally, we should have positive growth this year,” he added.
Confidente. Lifting the Lid. Copyright © 2015