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Economic growth forecast for 2018 cut to 0.9% from 1.9% – experts

Economic growth forecast for 2018 cut to 0.9% from 1.9% – experts

With the ongoing recession, PSG Konsult Namibia has cut its forecast for Gross Domestic Product growth to 0.9% (from 1.9%) in 2018, 2.3% in 2019 (from 3.6%) and 3.6% (from 4.4%) in 2020.

The firm this week said it is of the view that industries such as retail, manufacturing, utilities and fishing continue to underperform, thus clouding the economic outlook. This is further fueled by global trade disputes, weaker-than-expected growth in Namibia’s key trading partners and rising inflationary pressures.

“Our outlook for growth has become gloomier due to the disappointing Q1 GDP figures, the re-emergence of inflationary pressures and moderating Chinese growth as well as the risk of trade protectionism,” PSG said.

The firm stressed that risks are skewed to the downside in the short run due the uncertainty of the effects of the global trade war, the EM debt crises in Turkey and Argentina, Brexit and the trajectory of oil prices.

“Nevertheless, our base case assumptions are that these uncertainties will subside in the short term. Growth is expected to improve thanks to a recovery in construction sector output and consumer spending (both are coming off a low base),” the firm explained.

Meanwhile, PSG said that signs of democratic decay are a concern to their assessment of overall political risk, but not in the short to medium term as the ruling party, SWAPO, will once again win elections in 2018 with the usual large majorities.

“While the current political environment is relatively stable, a serious stability issue could arise over the long term if policies that improve wealth distribution are not successfully adopted,” PSG said.

Furthermore, the average inflation rate is expected to decline to 4.5% this year from 6.2% in 2017, owing to weak domestic demand which reduces exchange-rate pass-through, lower grain prices and a slowing property market, but upward inflation pressure is building due to higher fuel and administered prices as well as renewed currency weakness.

There are expectations that the average inflation rate to pick up to 5.4% in 2019, PSG added.

About The Author

Donald Matthys

Donald Matthys has been part of the media fraternity since 2015. He has been working at the Namibia Economist for the past three years mainly covering business, tourism and agriculture. Donald occasionally refers to himself as a theatre maker and has staged two theatre plays so far. Follow him on twitter at @zuleitmatthys