Economy suffers its first annual contraction in 24 years
The Namibia Statistics Agency (NSA) released its preliminary national accounts data for 2017 on 29 March showing that the economy contracted slightly by 0.8% in 2017.
The economy performed poorly last year, recording the first contraction in GDP since 1993. PSG Konsult noted that despite robust recoveries in mining and agriculture, the economy was weighed down by another sharp decline in construction output and very weak wholesale and retail sales.
Additionally, GDP growth for 2016 was also revised a touch lower to 0.7% from 1.1%, while revisions to the 2014 and 2015 growth rates were marginal. The downswing in GDP growth since 2016 was due to the slump in construction activity, low commodity prices and production disruptions at major mining operations.
Other negative factors included the severe drought, falling fish catches, high food price inflation, reduced regional trade, fiscal austerity and government liquidity pressures. among other negative factors.
However, PSG Konsult stressed that the outlook for 2018 is somewhat better, thanks to an expected uptick in mining production, improved consumer spending and a slower decline in construction output.
PSG Konsult added that due to poor rainfall since November, western Namibia is experiencing a severe drought (despite recent downpours) which bodes ill for the agricultural sector and there are also concerns that a trade war between the US and China could reduce global trade and hurt commodity prices, which would adversely affect Namibia’s mining and manufacturing exports.
“A loan from the African Development Bank (AfDB) is helping the government to plug holes in its budget and to fund infrastructure projects that will offer relief to the ailing construction sector,” PSG Konsult said.
Furthermore, production at Husab is expected to ramp up this year and the mine is expected to reach full-capacity production of 6,500 metric tonnes per year in 2019.
Lower inflation and an accommodative monetary policy stance are also expected to drive a modest recovery in consumer spending.
“The positive political developments in South Africa could support the Namibian currency’s strength and lead to a slight improvement in trade with South Africa. We believe that quarterly GDP growth bottomed out in Q2 2017 and that the economy should expand again in 2018, but growth risks are tilted towards the downside,” PSG Konsult stressed.
Caption: The downswing in construction activity continued due to the conclusion of major mining projects and cuts to government capital expenditure.
