Business confidence improves on the back of governments’ ability to raise capital
“Namibian’s real GDP at market prices shrank 4.3 percentage points year on year in 2016, closing at a revised 1%” said Anton Mushongo, Standard Bank’s Business Support Officer, quoting figures from the Bank of Namibia.
Mushongo said confidence in the economy is fairly bleak following a number of disruptive events. Pointing out that all economies worldwide follows a cyclical pattern, he presented a simple bar graph to illustrate the previous cycle which peaked in 2014, faltered in 2015 and crashed in 2016, with a meagre 0.3% real growth rate according to the preliminary national accounts.
“2015 recorded growth of 5.3% year on-year, this is 1.2 percentage points lower than the 6.5% recorded in 2014, in which economic activities were at a peak since 2010” said Mushongo.
He said consumer and investor confidence was impacted negatively following the increases in the repo rate, the drastic slowdown in Gross Domestic Product growth, the impact of low commodity prices especially diamonds and uranium, the weak performance in the construction industry and the negative outlook asigned by international ratings agencies. The combination of factors eventually spilled over to government revenues which came under severe pressure from September 2015 and continued during 2016.
But Mushongo argues the economy is in much better shape than reflected by the immediate statistics. “Despite Fitch revising the Sovereign Credit Rating outlook from stable to negative, the government’s ability to secure a N$10 billion loan from the African Development Bank to sustain its expenditure programmes is one way to support this notion” he said.
Citing Namibia’s short history of no defaults as a further indication of reduced credit risk, he said “Painful but necessary measures have been put in place by the government to consolidate spending” which is expected to reduce the budget deficit to approximately 3.6% of GDP in the 2017/18 fiscal year. In 2016/17, government debt exploded to 6.3% of GDP but with the austerity measures in place, overall debt is expected to stabilise at 42% of GDP before gradually moving to the 35% debt ceiling as determined by the Cabinet in 2011.
In conclusion, Mushongo stated that the economy will undoubtedly withstand the prevailing headwinds provided it continues to recover.