Namibia Economist (Windhoek)

7 December 2012

Namibia: Fitch Outlook Stable

The recent Fitch ratings has shown a stable outlook for Namibia, a slight improvement from the previous negative outlook. Long-term foreign currency and long term domestic currency issuer default ratings remain at "BBB-" and "BBB" respectively

According to Fitch, public debt is projected to be 26% of Gross Domestic Product by the end of 2012. This comes as no surprise since government's expansionary fiscal policy led to an increase in debt financing since 2009. Fitch expects the budget deficit to decrease in the projected fiscal years 2014/2015 to 2.4% from the current 2012/2013 projection of 4.2% of GDP. The SACU receipts are expected to revert to the average 9.5% of GDP by 2014 after extreme fluctuations in 2011 (7% of GDP) and 2012 (12% of GDP).

In terms of overall economic growth, Fitch's forecasts remain strong with an average growth rate between 4% and 4.5% expected for 2012 to 2014. This can be attributed to strong export revenue (45% of GDP in 2011) and stable foreign direct investment flows which constitute 6% of GDP from 2008 to date. Caution must be drawn to a possible slack in Namibia's growth if trade partners South Africa, the United kingdom and the Euro area tighten their belts. The foreign exchange reserves are expected to stabilise at 2.7 months of current external payments by 2014 following consistent drops in the average from 3 months in 2011 to 2.9 months in 2012. "This projection is in line with the overall tightening of the budget deficit projected at 2.7% of GDP. All in all the overall outlook details a shift in the economy from expansionary to contractionary fiscal proceedings. The main area of concern is the high unemployment rate at 34% and troubling human development index which affect the overall country ratings.

These projections are made with major assumptions in play such as the SACU transfer formula remaining unchanged and commodity prices remaining stable.

Fitch said human development indicators are key weaknesses relative to peers. GDP per capita is USD5383, compared with the 'BBB' range median of USD10,085.

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