…expects overall budget deficit to remain elevated at 7.6% of GDP
Fitch Ratings has downgraded Namibia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB-‘ from ‘BB’. The outlook is stable.
In its rating report and among other key issues, Fitch said that Namibia’s modest growth prospects and a rigid expenditure profile will maintain high fiscal deficits relative to ‘BB’ peers.
“Fitch estimates the general government (GG) fiscal deficit widened to 9.5% of GDP in the fiscal year ending March 2022 (FY21/22, including 0.7% of GDP off-budget items not included in government numbers), above the estimated ‘BB’ median 5% deficit for 2021, from-8.2% in FY20/21. International financing conditions have tightened, which will lead to further increases in the government’s interest bill (16% of revenues in FY21/22).
“Growth in tax revenues and a freeze on the public sector wage bill (55% of revenues in FY21/22) for the fourth consecutive year should support improvement in the GG primary balance in FY22/23, but Fitch expects the overall deficit to remain elevated at 7.6% of GDP, significantly above the current 4.8% 2022 deficit forecast for the ‘BB’ median, and also above the government’s forecast of 5.6%,” the agency said.
Speaking about growth prospects, the ratings agency noted that the economy is estimated to have expanded by 2.4% in 2021, after contracting 7.9% in 2020.
“This compares with ‘BB’ median growth of 5.9% in 2021 after a contraction of 4.1% in 2020. Namibia’s recovery was primarily driven by the mining sector, which in turn was supported by increased diamond, gold and uranium output. Fitch expects growth to increase to 2.8% in 2022 and 3.1% in 2023, supported by additional increases in mining production and continued recoveries in secondary and tertiary industries,” extended Fitch.