Growth outlook in line with trend growth
RMB recently issued a study on global market research for sub-saharan Africa. Daniel Motinga, Head of Research at FNB Namibia was one of the contributing authors and summarized the situation in Namibia
Motinga said: “Our expectation of growth printing around 4.5% is in line with most forecasts, most notably the Bank of Namibia expectation of 4.4%. We have too little information from the supply side to substantially alter our growth outlook. Data from local uranium mines shows that production was up 17% y/y in 1Q13, although it was down 13% over the previous quarter. We do not see risk of a significant slowdown in overall mining production for the moment. We are worried about the medium-term impact of the drought on agriculture’s performance for 2013. Government has declared a state of emergency because of the drought, which is welcome. But the impact could be minimal given that the sector only accounts for 4.1% of GDP. Mining is much more important at 11.5% of GDP and an adverse shock to this sector would have a much greater impact on growth.”
Regarding inflation Motinga said that inflation printed 6.1% y/y in April from 6.3% in March. He advised that most of the pricing pressure is coming from the services component, accelerating by 9.7% y/y compared to goods inflation of 4%, which is a trend observed since May 2012. However, overall inflation is decelerating on a monthly basis from 0.4% in March to 0.2% m/m in April. This is a positive signal. It means the rate which general prices are increasing is slowing which is positive for the average consumer’s purchasing power.
On the topic of food inflation he said that it continues to remain at relatively subdued levels at 6.8% y/y, the same as in March. “We expect food inflation to have accelerated to around 7.3% in May before it peaks around 8.5% in June. Despite our expectations of a short-term acceleration, we think food inflation will average 6.8% this year compared to 8.8% in 2012.”
In the report Motinga states that the Bank of Namibia believes that inflation is currently at tolerable levels and that monetary policy should continue to support growth. He added: “We interpret that the current policy of low interest rates will prevail for this year. Of course, the monetary policy narrative in Namibia is not immune from the policy dynamics in the anchor economy, which means the Bank of Namibia’s hands are probably tied in so far as changing rates in relation to developments in the domestic macro environment.”
Namibia’s growth outlook is generally in line with trend growth given the challenges in key export markets. Angola has a GDP growth rate of 8% and inflation of 9%, Botswana 5% and 7%, Mozambique 7,5% and 7% and South Africa has a GDP growth of 2,4% and inflation of 5,6%.