News Analysis: Economists say Namibia's economic outlook downgrade expected

A number of Namibian economic experts have said the recent Fitch downgrade of the country's economic outlook was within expectations.

Fitch Ratings announced last week that they had downgraded Namibia's economic outlook from stable to negative, as the government debt leaped from 23.2 percent in 2014 and to a forecasted 39 percent of GDP by the end of 2016.

It also cited falling Southern African Customs Union revenue and the 10-year 750 million Eurobond Namibia got in 2015, and the dwindling foreign reserves.

Some of the reasons the rating agency gave was the proposed New Equitable Economic Empowerment Framework that would entail that companies give 25 percent shares to previously disadvantaged Namibians amid a widening budget deficit, which progressed from 0.1 percent in 2012 to 3.4 percent in 2013, and again to 6.4 percent in 2014.

Fitch said although the proposed economic law lacks details, it is likely that parliament will approve it thereby causing "some unease in the business community and could slow down foreign investment in manufacturing and services".

Already a number of organizations have advised the government to abandon the proposed economic law, with employers and businesses saying it will adversely affect foreign investors.

Suta Kavari, who is with an investment firm, the proposed new economic law has led to a slowdown in foreign investments.

Kavari said the slowdown will continue if there is still uncertainty over the proposed new economic law and if the government pushes on to implement it.

However, Presidential Economic advisor John Steytler said Fitch's views on the proposed new economic law were premature since a consultative process is underway.

He said the rating was expected because globally the economies are slowing down.

"We're not entirely surprised that this happened, knowing that globally there have been a lot of headwinds. Some countries have lost their credit ratings, so we're glad that we remain creditworthy and able to borrow at good rates," Steytler said.

According to Steytler, there is no need to worry because the rating is a "normal cycle the entire world is going through".

"It would've been worrying if the global economy was positive, while ours is negative. What is happening here is a trend of the global economy outlook," he said.

Purvance Heuer, a director with a research firm based in Windhoek, said the rating was expected especially considering that Namibia is an emerging economy.

"Emerging economies, or commodity-exporting economies like South Africa have been experiencing the wrath of low commodity prices that exerted pressure on exports revenue and fiscal position," Heuer said.

Finance minister Calle Schlettwein concurred, saying Namibia as a small growing economy is buffeted by the prevailing global slowdown.

Namibia, the minister said, does not exist in a vacuum and that the situation in Angola as well as the depressed commodity prices contributed to the economic outlook downgrade.

"In this more challenging environment, one cannot expect to see the strong revenue growth of the 2012-2014 period repeated in the coming few years," Schlettwein said. "We need to be careful in handling cases in our economy, such as wage negotiations."

Economists Rowland Brown said the current situation was foreseeable and should have been avoided, while urging the government to take the rating as a warning and heed the views of analysts who have been warning about the impending issue for more than a year.

"A ratings downgrade can still be avoided, but extremely tough decisions are needed from the fiscus and the government as a whole to ensure this does not materialize," he said. Endit