Fitch sustains Namibia’s credit rating at BB+

15 Aug 2018 17:20pm
WINDHOEK, 15 AUG (NAMPA) – The United States of America’s Fitch credit rating agency has revised Namibia’s credit risk outlook from negative to Stable.
The rating released on 13 August 2018, affirmed Namibia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+'.
According to the ratings agency, Namibia's BB+ rating is weighed down by weak medium-term growth prospects and wide budget and external deficits relative to rating peers.
“This is balanced against public and net external debt ratios below the current 'BB' median and relatively strong governance indicators.”
The revised rating took into consideration government's stated commitment to stabilising debt and undertaking fiscal reforms, as well as signs of a modest economic recovery, the agency said.
The ratings added that Namibia’s Gross Domestic Product (GDP) contracted by 0,8 per cent in 2017 and the economy will recover only modestly in 2018 and now expected GDP to rise by 0, 6 per cent in 2018 (previously two per cent ) and 1,8 per cent in 2019 (previously three per cent).
This growth is driven by the pick-up in mining and other tradable sectors amid subdued domestic demand.
Fitch further projected that current spending or the country’s GDP would decline, at a slower pace than assumed by its authorities, while domestic tax revenues would rise as the economic growth slowly recovers and recently announced tax measures are implemented.
“The authorities are attempting to enhance revenue collection and curb non-priority recurrent outlays,” the agency stated in its report.
The credit agency also noted that the weak macroeconomic environment reduced the profitability of the banking sector and caused an uptick in the ratio of non-performing loans to a still low level of 2,9 per cent in March 2018 from 1,5 per cent in 2016.
“The strong interconnectedness of banking and non-banking financial institutions is a source of liquidity risk amid bank dependence on wholesale funding from the latter,” the credit ratings agency said.
In 2017, sovereign rating model downgraded Namibia from BBB- to BB+ with a stable outlook.