2016 worse than 2009, or at least according to the national accounts
OK, so the cat is out of the bag. Economic growth for 2016 is far worse than anybody imagined. Even the Bank of Namibia’s downbeat expectation at the interest rate announcement in February, still hoped for aggregated growth in Gross Domestic Product of 1.6%.
Now the Namibia Statistics Agency, without any fanfare, announced officially, economic growth was only 0.2%. This makes we wonder where the Bank of Namibia dug up the 1.6% figure, a statistic that was elevated to gospel status by the Minister of Finance in his budget presentation.
Later in the week, the minister had opportunity to responds to some of the issues raised in contributions by Members of Parliament regarding the budget. He used a substantial part of his reply to convince us it is a useless exercise to compare his new budget with the original February 2016 budget. When the Members of Parliament approves the Mid-term Budget Review, that becomes the new Appropriation Bill, replacing the previous therefore any comparison to the original budget is a waste of time.
This argument is so vacilating, it is almost comic. As a matter of fact, the minister offered this feeble insight to explain why there is so little difference between the Mid-term Budget Review and the new budget, not, as I would expect, to explain why the economy had such a horrendous crash in 2016. And even more worrying: – if the mid-term review was based on the 1.6% GDP growth figure, what is going to happen with the new budget?
But the biggest entertainment came from the statistics agency. Without a blush, they told us the “domestic economy recorded a marginal growth rate of 0.2% indicating slowing of economic activities compared to 6.1% recorded in 2015.” And then the coup de grace, “the main drivers behind the slower growth in GDP was the secondary and tertiary industries.” (language unedited – Ed.)
Staggering, unbelievable! Who would have ever guessed that. Not if government spend on building projects came down from a 31% growth level in 2015 to a meagre 6.3% in 2016. Similarly, the statisticians enlightened us all by telling us construction, which still grew a healthy 27% in 2015, suddenly fell off a cliff, contracting by 29.5% last year!!!
Soberly, the statistics agency reveals this is due to a drop in investment by the mining sector (minus 65.3%) combined with the government’s scaling down.
According to the preliminary National Accounts, this is our lowest growth on record since they put the 2009 GDP growth rate at 0.3%. Where they get this figure, heaven knows. In the 2010 preliminary National Accounts, the contraction was minus 1.1%, later in the year revised to -0.9% in the finals. Still, the Minister of Finance and the Bank of Namibia in 2010 and 2011 preferred to use the -1.1% statistic.
So, if the economy is purported to have grown by 0.3% in 2009 while in actual fact it shrunk, how much value must I attach to this week’s 0.2% for 2016.
Several analysts have calculated that the economy was in a technical recession during the second quarter last year, broke even in the third quarter with a small uptick in the final quarter.
But if annual growth has just been revised down from 1.6% to 0.2%, where to did the rest of the expected growth disappear?
2016 was not a good year, not by any yardstick but I did not realise it was such a train wreck.
Of course, now that the new official view has been released, the final National Accounts become crucial, although when they become available, I suspect the information will be of academic value only.
The only thing that is clear from the preliminary National Accounts is that we have to be extremely careful how we spend this year and next. I suspect a few more revisions and we may just find that the economy was in recession, not only for a quarter but the full year.
The only relevant question then will be, not how much we lost, but how are we going to get it back?