Economic outlook for 2021: The economic recovery – when will it come?
By Bruce Hansen
Managing Director, Simonis Storm.
The final National Accounts for 2019 painted a slightly better picture of the Namibian economy than previous estimates. The economy contracted only in 2017 and 2019 with a stagnation in 2016.
Due to the low base because of the contraction in 2019 and low growth before, we are slightly more optimistic about the prospects for this and the next two years in our fair case scenario than the respondents to our survey.
This low-base effect coupled with the re-prioritisation of expenditure and renewed public-private sector cooperation should yield better economic prospects for the coming two years. But even with our fair case projections of 3.0% and 3.5% growth, GDP will only reach the 2019-level in 2023.
Government debt is expected to increase to N$119,8 billion by the end of the financial year 2020/21. Corporate and individual debt stood at N$42.6 billion and N$59,8 billion respectively at the end of October 2020.
Government’s domestic debt stock is expected to account for 63.3%, while the foreign debt stock 36.7%. Interest payments are slightly in favour of the foreign debt stock making up 38.0% compared to 62% for domestic debt. Interest payments will amount to N$6, 95 billion.
The budget deficit is forecasted to top 10% of GDP equivalent to N$17,6 billion. The net funding requirement is slightly lower at N$15, 6 billion owing to own sources. Although the budget deficit is anticipated to decline to 4.1% by 2023/24 this will not be enough to contain the rising debt level.
Threats of supply interruptions during the Covid-19 pandemic have led to renewed policy interest in the agricultural sector globally. Although Namibia’s arid to semi-arid climate and often poor soil certainly limit the agricultural potential, the sector definitely has untapped potential. The Mining outlook remains bleak.
With no new mines coming on-stream in the near future, the mining sector’s outlook depends on increased uranium production at Husab as well as increased diamond production once the new diamond vessel is in operation. Copper prices could increase further if the global economy returns to growth. Manufacturing is expected to benefit from ‘buy local’ and good rain. Wholesale and retail trade is under pressure from various angles. Construction may have a silver lining on the horizon and Expected growth in Tourism amidst business closures.
There are definite opportunities available to Namibia but Economic recovery will remain unlikely if the following are not addressed: ambiguous communication to investors, slow or no structural reforms, lack of accountability, lack of private sector engagements, slow execution, corruption and lack of common goals.
Using the past as a steppingstone, we must conquer our inability to identify, assess and execute initiatives (and there are already solutions on the table), administrative ineptness, lack of monitoring and review and accountability.
The speed of decision-making and action have become more critical to prevent us from falling further into the abyss. Now, more than ever, we require someone to unite and galvanize the nation.
Simonis Storm Securities Managing Director, Bruce Hansen.