WINDHOEK – Minister of Finance Calle Schlettwein says government remains optimistic that economic growth prospects will gain traction as the implementation of adopted austerity measures is scaled up. Schlettwein’s comments come as Fitch Ratings on Tuesday downgraded Namibia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to two notches below investment grade at ‘BB’ from ‘BB+’, with a stable outlook.
Fitch’s view is that the Namibian economy remains under recessionary pressures, amidst external shocks arising from the impact of the prevailing severe drought, elevated risks of contingent liabilities from certain public enterprises and lower sub-regional growth outlook.
According to Fitch, Namibia’s most important objective over the short and the long-term should be to achieve economic growth, which is the necessary condition for the reduction of public debt, revenue generation, the creation of jobs and the reduction of poverty and inequality.
In a statement released on Tuesday night, Schlettwein said government summons the collective support of all Namibians and calls on the private sector and investor community to remain positive and supportive during this adjustment process. In addition, Schlettwein reiterated government’s commitment to growth-friendly consolidation and structural reform packages to support domestic economic activity, improve business confidence, policy certainty and improving sustainable public debt management.
“We are confident that policy packages will place the economy on a firm positive and sustainable growth trajectory over the medium to long-term. Throughout the years, Namibia has demonstrated its ability and resilience to deal with shocks and also to direct policy actions to addressing socio-economic development needs,” read Schlettwein’s statement.
Namibia’s credit worthiness is rated by two international credit rating agencies, namely Fitch and Moody’s, both of whom conduct annual ratings assessment of the Namibian economy and its creditworthiness.
Fitch Ratings undertook its latest annual assessment visit to Namibia during the second week of September 2019, of which the Ratings Action Report was released on Tuesday, in line with the dissemination formalities of the credit ratings action reports. During the assessment visit, Fitch held consultations with government, the private sector and non-state actors as part of the consultation process.
According to Schlettwein, the consultations allowed for the articulation of government’s macroeconomic and fiscal policy stance while Fitch also assessed the latest economic developments and undertook its own medium-term forecasts of the economic outlook.
Schlettwein pointed out that the ratings assessment and consequent action by Fitch ratings was undertaken in the context of subdued developments in the global, regional and domestic economy. The finance minister also emphasised that the global economy is facing significant headwinds, arising from the multiplicity of risk factors which have become manifest. As such, the International Monetary Fund has revised downwards the global economic outlook for 2019 three times since April 2018, from 3.9 percent to 3.2 percent.
The finance minister further highlighted slumping global trade, which is also struggling to grow, while non-fuel commodity prices are projected to decline during 2019. This, said Schlettwein, is a result of a combination of adverse factors, chief among them being the on-going trade spat pitting the United States and China, which weighs heaving on commodity exporters such as Namibia through reduced demand.
“Namibia, as a small open economy, is exposed to these adverse global developments through the trade channel, although specific domestic factors are noted. Within the sub-region, the Namibian economy is closely interconnected with the neighbouring economies as trade partners whose growth is equally subdued,” said Schlettwein.
He added that in the international credit ratings context, Namibia is one of the few countries rated in the Sub-Saharan African region and, in fact, was the last investment grade economy in the region as rated by Fitch, before the downgrade in 2017.
Schlettwein added: “Notably, Namibia is currently experiencing one of the severest drought spells in recent times, which occasioned the deep contraction in the agricultural sector as well as water scarcity affecting water depended industries. Adjustments to commodity prices and shocks to income have taken longer, given the prolonged presence of the risk factors arising from the vagaries of the global and regional economic and trade developments.”