8 February 2013

Namibia: International Watchdogs Rate Nam As Stable

THE state of Government's finances got FitchRatings' nod of approval on Wednesday, following on the heels of international credit rater Moody's thumbs-up at the end of January.

Like Moody's, FitchRatings also reaffirmed Namibia's overall outlook as stable. It rated both the country's public finances and macroeconomic environment as "neutral", classifying Government's external finances as its strong point and structural issues as a weakness.

FitchRatings, like Moody's, expects the domestic economy to grow at a slower pace this year. However, whereas FitchRatings is forecasting growth of 4,2% in 2013, Moody's pegged its forecast at 4,0%. For 2012, FitchRatings estimates economic growth of 4,0%.

For 2013-14, Fitch forecasts a budget deficit of 4,2% of gross domestic product (GDP), compared to the about 5% of Moody's.

According to Fitch, Government debt is expected to reach 28,7% of GDP in the coming fiscal year, while Moody's forecasts 30%.

Moody's expects slower economic growth this year, "with a deceleration in mining output growth being largely offset by stronger construction, manufacturing and tourism".

"Government outlays on projects related to the Targeted Intervention Programme for Employment and Economic Growth (Tipeeg) - now integrated into the Fourth National Development Plan (NDP4) - plus the boost to household spending from December's retroactive payment of civil servants' 2012 8% pay rise will drive domestic demand.

The return of a more vigorous pace of growth would depend upon an economic revival in Europe, Namibia's largest export market," Moody's said in its annual credit report on the country.

The agency doesn't expect Government's debt to rise above 30%, "given policymakers' plans to rein in current spending next year in favour of investment".

On the negative side, Moody's said Government's recent imposition of new export levies and withholding taxes is a risk to profitability and investment in the mining sector, which could adversely affect production and exports going forward.

"Although the revenue measures echo the global trend towards higher taxation on the extractive industries in resource-rich countries, excessive taxation could lead to mine closures and widespread layoffs of personnel at a time when government is trying to bolster job creation and maintain Namibia's reputation as an attractive destination for foreign investment," Moody's said.

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