FNB maintains GDP growth outlook
Contrary to popular sentiments, First National Bank Namibia (FNB) says the country will see a 4.1% GDP growth in 2011 despite fears of a double dip recession stoked by the sovereign debt crisis in the euro zone area.
In August, the central bank announced it was revising downwards its 4.1% GDP growth forecast for 2011 due to uncertainties in the global economy, and delays in the implementation of the N$14.7 billion TIPEEG programme.
However, FNB economist, Daniel Motinga is adamant that the 4.1% GDP growth will be achieved this year. Motinga says his bank’s forecast for 2011 and 2012 remains largely unchanged despite the downsize risks for the 2012 outlook.
He said: “Our GDP forecast for 2011 and 2012 remains largely unchanged. We still see growth approaching 4.1% for 2011 and about 5% for 2012. However, we see some downside risk for the 2012 outlook particularly because of the global uncertainties linked to Greece and Italy. Italy is the eight biggest world economy and with a debt of US$2.6 trillion it may prove difficult to bail them out. Italy’s debt has aggressively repriced ….”
But despite the optimism, the economist is of the view that the sovereign debt crisis in the Euro Zone area may pose significant risks for the country as Europe was Namibia’s biggest export market.
“I think the risk is significant for our exports, although consumer demand is busy recovering very slowly. A renewed bank crisis will push demand backwards.”
But for now Motinga says Namibia, just like the rest of the emerging economies, was somehow insulated from the economic turmoil in the developed part of the world.
“Part of our resilience stems from the fact domestic demand has held up quite well since 2010. Why? Government’s higher wage spend and increased expenditure has boosted demand. Furthermore, we have not had further redundancies since the retrenchments in the diamond in copper mines about two year ago.
“Also our trading partner, South Africa is also growing relatively well which provides some stability. Since the 2008/9 financial crisis we have seen consumers deleveraging and now there is some capacity to borrow and spend.”
Motinga, believes there is a 30 to 45% probability of a double dip recession. “Our core view is that we may simply see a pedestrian growth without a double dip thanks to the growth momentum in emerging economies.”
He adds that Namibia’s inflation, which increased to a 20-month high of 6.1% in October, was likely to peak at 7.9% in December because of fuel prices pressures and food inflation which he said was likely to peak at 8.2% year on year in December.