Growth outlook under threat – FNB

FNB’s estimated 4% GDP growth outlook for 2012 is under serious threat if mining, especially diamond output, continues depressed, leading economist Daniel Motinga has said.
Motinga says that the production and offtake data for the first three months of the year paints a mixed picture for mining. Refined zinc production is down about 4% year on year while diamond production is also under pressure with only 195.6 000 carats produced for the first quarter. This is 32% less than the corresponding period of last year.
“Based on our calculations, if this trend continues we foresee a 12% drop in diamond production for this year. A significant drop in diamond output could affect our GDP growth forecast of 4% for 2012.
“However, this is not yet a core view but it is something we will address in future,” says Motinga.
According to Motinga, the risks to mining are elevated largely due to the risk emanating from trade union activism.
On a positive note, uranium production is gaining momentum with a growth of 10% year on year for the first quarter of 2012. Uranium export earnings also rose to N$866 million over the same period.
“But overall we think mining sector production is under pressure for 2012. A mineral production index (excluding copper) which we compiled signals a 12% year on year reduction in combined mining output for this year even though global mineral prices are stable.”
On the demand side, FNB says consumer sentiment remains positive which augers well for the growth outlook. “However, we are noticing signs of distress or rather an absence of direction.”
Recent Bank of Namibia data on private sector credit demand shows an average growth of just above 11% year on year over the last twelve months. Crucially, household credit demand also lacks buoyancy over the last 12 months. New vehicle sales that grew by 7% month on month as at the end of March 2012 has stalled on a monthly basis in April.
For April 2012 new vehicle sales, which is a key indicator of consumer spending, fell by 16% month on month. However, it is up 23% year on year. Furthermore, most of the recent growth in asset-backed credit is driven by mortgages.
Overall, Motinga says that he sees a  major weaknesses in non-asset based credit over the medium term.