Analysts revise GDP growth forecast downward
The sudden stop in domestic economic activity and international trade travel caused by the global Covid 19 pandemic has prompted economic analysts to lower their real GDP growth forecast for Namibia significantly.
PSG Namibia’s Head of Research, Eloise du Plessis says they now now expect a 7.8% contraction this year, compared to the International Monetary Fund’s latest forecast of 2.5% for 2020.
She noted that this is because Namibia is particularly vulnerable to the COVID-19 induced global growth slump, due to its relatively large dependence on tourism, minerals exports, public investment, and the economic well being of its key trade partner South Africa.
Namibia’s travel and tourism sector’s total contribution (direct and indirect) was nearly 15% of GDP in 2019 and is now expected to fall to about 10% this year. The prices of diamonds (the country’s key export) have fallen sharply since the start of 2020 and De Beers has cancelled its third sales events for the year, due to lacklustre demand and the logistical difficulties related to the COVID-19 pandemic.
Beyond falling commodity prices, the mining industry has been hit by the suspension of all mining activities since the end of March, which is set to continue until the lockdown is expected to end on May 4.
Du Plessis explained that although the government has announced a N8.1 billion (N$420 million, or 3.7% of GDP) Economic Stimulus and Relief Package (including N$5.2 billion in direct support to businesses and households), they expect the package will come at some cost to public investment and that there could be trouble with its execution.
“Furthermore, about N$3.8 billion of this direct support to business represents funds that are owed to businesses anyway (such as overdue invoices and VAT repayments) and the direct support of N$562 million to households is welcome but miserably insufficient as households who have lost income due to Covid 19 will receive a once off payment of a mere N$750 (N$40) per employee,” du Plessis said.