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FNB doubts 5% GDP growth

Daniel Motinga, Senior Manager Research and Development at FNB Namibia.

Daniel Motinga, Senior Manager Research and Development at FNB Namibia.

Daniel Motinga, Senior Manager Research and Development at FNB Namibia has revised the annual GDP growth outlook down from 4,5%to 3,9% in the recent Africa monthly report by RMB on Global Markets.

Motinga said “We believe the economy expanded by 2.8% in the first half of 2013 and expect most of the momentum to be in the second half of 2013. Our biggest concern is the sluggish pace of private consumption growth, which registered an 8% increase in 2012. We forecast a slight improvement to 8.3% in 2013, largely supported by tax relief. We are also becoming less bullish on investment spending growth given the large base established in the prior year.”
He said Investment spending rose by 19.7% in real terms in 2012, a feat impossible to replicate in 2013, particularly as there was a deceleration in private sector investment. “On the demand side, imports would detract from growth as they continued to expand near 12% year on year compared to exports, which are likely to recover from 4.7% year on year in 2012 to 8% in 2013.”
“However, over the medium-term we see growth quickening from 2014 onwards as investment spending recovers particularly in the construction space. Our view of flat interest rates over the medium-term should also entice businesses to draw down on facilities much more aggressively and encourage the creation of capacity for future growth.”
He believe agriculture will contribute significantly to growth this year, while uranium production was picking up steadily. Langer Heinrich mine reported a 10% increase in production in the second quarter this year comparer to the first quarter despite the slump in uranium prices.
With regard to inflation he said it printed at 6.2% in June which was lower than the forecast of 6.3% on account of the better than expected performance in the food inflation component. “However, most of the pricing pressure is coming from the services component, which suggests that the pricing power has probably shifted from goods producers to service providers.
On monetary policy Motinga said the Bank of Namibia’s view is that  inflation is currently at tolerable levels and that monetary policy should continue to support growth, given the external risk to the growth environment. “Although we share the bank’s sentiment, we interpret the statement to mean that current policy, characterised by low interest rates will prevail this year. We think the current rand volatility could persist, reducing the likelihood of an interest rate adjustment this year.”

 

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