Yet another downgrade for Namibia

RATING agency Fitch has downgraded Namibia's credit rating due to weak economic performance.

In their latest statement, Fitch says the Namibian economy was 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," the statement released on Saturday said.

According to Fitch, 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," the statement said.

According to Fitch, the adverse impact of the war in Ukraine on global growth prospects and energy prices, as well as tighter global financing conditions, represent headwinds for the economy.

"Moreover, the gradual nature of the recovery, partly explained by structural constraints on growth, will result in real GDP not recovering to the pre-pandemic level until 2024, and contribute to the rising trajectory in GG debt levels," the rating agency said.

Fitch said Namibia's 'BB-' IDRs also reflect external shocks.

"Namibian exports increased by 1,4% in 2021, with diamonds accounting for 19% of total exports, followed by uranium and fish at 15% each. Despite increased export volumes, Namibia registered a current account deficit (CAD) equivalent to 9,2% of GDP (current account balance of 2,6% in 2020), given a steep rise in the import bill for petroleum fuels and lower transfers from the Southern African Customs Union, a key source of fiscal and external revenue.

“In light of prolonged high oil prices, Fitch expects the CAD to widen further to 11,3% of GDP, more than triple the forecast 3% of GDP for the 'BB median' in 2022 before narrowing to 6,8% in 2023," the rating agency said.