12 December 2018

Namibia: Moody's Affirms Namibia's Ba1 Ratings, Maintains Negative Outlook

Photo: Daily Trust
Moody’s Investors Service.

Moody's investors service has affirmed the Ba1 longterm issuer and senior unsecured ratings of Namibia, maintaining a negative outlook.

The affirmation of the Ba1 rating was announced on its website on Saturday, according to Namibia Press Agency, Nampa

The Ba1 reflects Namibia's gradually improving medium-term growth prospects and moderate wealth levels that support the economy's shock absorption capacity.

"The decision to maintain the negative outlook reflects Moody's concern that the government will not be able to address the vulnerability to shocks which the structure, level and trajectory of Namibia's debt burden creates," the ratings agency said.

Moody's noted that such shocks might include subdued growth in South Africa, lower than expected Southern African Customs Union (Sacu) revenue, a shock to commodity prices and/or a marked and prolonged tightening in external financing conditions including renewed depreciation of the South African rand.

The agency added that while the government has maintained its fiscal consolidation objectives, progress towards these objectives and the related strengthening of the country's fiscal institutions has been limited so far, leaving Namibia's credit profile exposed to economic and financial shocks.

Moody's further indicated that Namibia's long-term local currency bond and bank deposit ceilings are unchanged at A2, and the long-term foreign currency bank deposit ceiling is unchanged at Ba2, while the long-term foreign-currency bond ceiling is also unchanged at Baa2.

Moody's further projected gradually improving medium-term prospects, despite structural challenges, a growth gross domestic product (GDP) growth of one per cent in 2019, ending several quarters of contraction.

"Moody's expects Namibia's GDP growth to rise towards its potential rate of around 3,5 per cent. Combined with income levels above USD$10,000 (around N$ 141 700) in GDP per capita terms (at purchasing power parity), this will support the economy's shock absorption capacity."

The growth prospects are supported by developments in the diamond industry, tourism sector, the Walvis Bay Port (logistics sector).

However, Namibia faces structural economic challenges, including high unemployment and skills shortages which will continue to weigh on economic strength, Moody's added.

Moody's would likely downgrade Namibia's rating should the scope for a policy response that would effectively shore up Namibia's government finances and liquidity position in the event of an increase in financing costs and/or prospects of weaker revenue, diminish further, the ratings agency warned.(Nampa)

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