Fitch revises outlook on Namibia to 'negative'

Fitch Ratings has revised the outlook on Namibia's long-term foreign-currency issuer default rating (IDR) to negative from stable, and affirmed the IDR at 'BB+'.
The revision of the outlook to negative reflects Namibia's weak growth performance and our downward assessment of growth prospects with adverse implications for the government's ability to stabilise the public debt trajectory.
The economy is yet to rebound from the downturn that followed the 2010-2015 mining and construction boom. Our previous expectation of a gradual growth recovery in 2018 has not materialised. GDP declined for the 10th consecutive quarter in 3Q18, and Fitch now expects it to have contracted by 0.4% in 2018 versus our earlier forecast of 0.6% growth, following a 0.9% fall in 2017. The contraction reflects weak domestic demand, due mostly to fiscal consolidation, lower private investment and soft disposable income growth, as well as sluggish activity in neighbouring South Africa and Angola. This was only partly offset by robust activity in mining mostly due to the ramping-up of the Husab mega-mine's production of uranium.
We now expect a more tepid economic recovery in 2019, given the weaker starting point and persistent headwinds. We forecast GDP to grow by 0.7% in 2019 (versus our earlier forecast of 1.8%) and 2.0% in 2020, well below the current 'BB' median of 3.2%. The pick-up in activity will be driven by continued growth in mining, while domestic demand will slowly bottom out, lifted by a rise in public investment supported by a ZAR4 billion loan from the African Development Bank (AfDB, AAA/Stable).
The medium-term outlook is subdued, and Fitch does not expect growth to recover to 2010-2015 average of 5.7%, due to the lack of fiscal space, sluggish outlook for activity in the region, the absence of large mining investment projects, and expectations of lasting weakness in Namibia's export commodity prices. Potential growth is also held back by persistent structural bottlenecks, including low education outcomes and a business climate that is somewhat weaker than rating peers.
We project the central government (CG) deficit to narrow modestly to 4.1% of GDP in fiscal year 2020/2021 (FY20/21, year to end-March 2021) from a forecast level of 4.6% in FY18/19. The government plans to proceed with gradual fiscal consolidation through savings on recurrent spending from efficiency gains, hiring restraint and incomplete adjustment of wages and allocations to inflation. It is also considering a set of minor tax measures.
-Fitchratings.com