CORRECTION: Negative rating not a signal of economy collapse

12 Jan 2017 21:40pm
CORRECTION: Adds information in fifth para to indicate that Boamah is attached to Capricorn Asset Management

WINDHOEK, 12 JAN (NAMPA) - Namibia’s negative economic outlook does not signal the collapse of the domestic economy or an inability to finance debt, a local economist has said.
On 02 December 2016, Moody’s Investors Services downgraded Namibia’s economic outlook from stable to negative.
In a report issued Tuesday, the investor company explained the downgrade is due to various reasons including rising government debt and liquidity stress induced by reliance on external export.
Another credit rating agency, Fitch Ratings, undertook a review mission to Namibia from 03 to 04 August 2016 and on 02 September issued a downgrade in which the country’s economic outlook was again revised from stable to negative.
In an interview on Thursday, Claudia Boamah, who is also an investment advisor at Capricorn Asset Management, told Nampa conclusions drawn by these agencies show that Namibia’s rating is still of investment grade.
Boamah said so far, Namibia’s economic leadership has taken the ratings into consideration and been responsive, unlike elsewhere on the continent where such ratings appear to be simply ignored to the point of no redemption.
“The whole world only just began to recover after enduring eight years of a global recession, which had adverse effects on the domestic export revenue due to falling commodity prices.”
In their report, Moody’s noted that countries like Namibia and other commodity dependent sovereigns in Africa that were downgraded will continue experiencing challenges in 2017.
“Sub-Saharan Africa’s economies will continue to face commodity-induced liquidity stress in 2017, with recurring fiscal deficits amid challenging financing conditions,” said the Moody’s report.
Responsive strategies have been devised and to some extent implemented, Boamah said, which should assist in coping with challenges in 2017.
She noted that Finance Minister, Calle Schlettwein has implemented austerity measures such as the cessation of non-priority government construction projects and an embargo on recruitment in the public sector.
The economist explained Namibia’s agricultural production was stunted by the drought, which also triggered an increase in government expenditure to provide drought-relief.
Tourism however, she said, could be regarded as a proactive response for foreign revenue.
“Perhaps recent efforts to boost international and domestic tourism indicate a proactive and creative approach to increase foreign revenue.”
Boamah said Moody’s credit rating is calculated by factors including per capita income, gross domestic product (GDP) growth, inflation, external debt, level of economic development and credit default history; factors used to inform investment decisions.
A negative credit rating implies that some or all of these determinants are not faring well in the nation’s economy.