The economic outlook for Namibia by Momentum Investments
By Lesley Rukoro
Economic growth in Namibia has now officially contracted for two consecutive years. This is confirmed by the recently released 2018 preliminary National Accounts which shows that the economy has contracted by 0.1% for 2018 following a contraction of 0.9% during 2017.
The 2018 contraction was largely driven by the agricultural sector on the back of the prevailing drought. This was exacerbated by the slowdown in the manufacturing and construction sectors. Most of the government construction projects were on hold during the year, causing the sector to contract by 18.3%. The tertiary sector also recorded declines with weakness in hotels and restaurants, private household consumption, wholesale and retail trade and transport sectors.
Consumer price inflation moved slightly higher to 4.5% during March from 4.4% in February. This increase was largely driven by food and non-alcoholic beverages which increased by 5.8%, alcoholic beverages and tobacco increased by 6.8% and transport prices which was up 7%.
The Monetary Policy Committee of the Bank of Namibia maintained the repo rate at 6.75% following the conclusion of its policy meeting on 10 April. It stated that the rate is appropriate to support the domestic economy, while maintaining the peg between the Namibia dollar and the South African rand. It further noted that domestic economic activity slowed down during the first two months of 2019 compared to the same period a year earlier. The slowdown was mostly reflected in the mining, agricultural and construction sectors.
Private sector credit extension grew by 6.4% during February on an annual basis, lower than the 7.1% growth for January. Growth in total credit extended to the corporate sector slowed to 6.3% in February, from 7.7% recorded in the previous month. According to the Bank of Namibia the slower growth is due to repayments made in the categories installment credit and other loans & advances by corporations. Similarly, household credit growth slowed to 6.3% in February, from 6.7% during January. This is attributed to lower uptake of mortgage credit. Broad money supply (M2) growth accelerated to 10.5% in February from 7.6% in the previous month. According to the central bank, the increase in M2 growth was supported by an increase in net foreign assets of the depository corporations.
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If you would like more information on this topic, please contact Lesley Rukoro at Momentum Investments email@example.com.