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Some economic indicators begin to point in the right direction

Some economic indicators begin to point in the right direction

By Eloise du Plessis
Head of Research, PSG Namibia.

Several high-frequency data releases published in the past quarter suggest that a moderate economic rebound occurred in Q2 2021, mainly reflecting base effects and softer Covid-19 containment measures compared with last year.

However, production in the important mining industry has been dismal in the first half of 2021 due to lower diamond, gold, and zinc output.

According to the National Association of Automobile Manufacturers of South Africa, total new vehicle sales increased by 85.7% year-on-year in Q2 2021 compared with a decline of 56.5% y-o-y in Q2 2020. In addition to reflecting base effects, the improved new vehicle sales are probably supported by lower interest rates and the pent up demand from wealthier consumers, who increased savings during the worst of the pandemic.

The Namibia Statistics Agency’s international arrivals index rose to an average of 32.3% in Q2 2021 up from a mere 0.8% in Q2 2020 when Namibian borders were closed to foreign travellers. Activity in the travel tourism industry still remains far below pre pandemic levels.

The beverage composite index swelled by 40.4% y-o-y in Q2 2021 thanks to relaxations of pandemic related alcoholic sales restrictions in Namibia and South Africa this year South Africa is the main destination of Namibian beer exports.

The electricity sales composite index surged by 6.9% y-o-y in Q 2 2021 up from a decrease of 6 1 y-o-y in Q2 2020. Locally generated electricity increased strongly over the past year, boosted by good rains in the north driving the Ruacana hydroelectric power plant and an increase in generation from independent solar power producers.

Meanwhile, mining production was disappointing in Q2 as diamond and gold production declined in this period, owing to temporary maintenance issues in the period which should not hamper production in second half of 2021.

Furthermore, the downturn in zinc production still reflects Vedanta’s Skorpion Zinc operation being placed in care and maintenance since May 2020 Vedanta said in May that it is investing N$6.5 billion ($440 million) in refinery conversion projects to create a sustainable life for Skorpion Zinc and shorten the care and maintenance period.

The total number of livestock marketed also dropped slightly by 0.8% y-o-y in Q2 2021 following a large decline of 47% y-o-y during the same period last year.

The weak sales of livestock are the result of the unavailability of livestock due to restocking, which follows successive years of devastating drought that depleted livestock populations.

Although the total number of livestock marketed declined in Q2 the numbers of small livestock exported to South Africa and Angola increased during the same period. The Statistics Agency’s latest merchandise data also shows a robust increase in fish crustaceans exports in Q2 an encouraging sign as fish exports are Namibia’s largest non mineral export product.

The latest sectoral reports from the Statistics Agency, in conjunction with some other high frequency data releases, suggest that economic output logged positive annual growth in Q2 2021.

This will only be confirmed when the Statistics Agency publishes its Quarterly GDP Report for
Q2 2021 on September 23.

We continue to forecast that real GDP will expand modestly by 1.6% in 2021, with economic growth picking up to 3.7% the following year. The recovery will be driven largely by the mining industry, which will benefit from increased diamond and gold production, exploration for crude oil and battery minerals, as well as the possible restarts of zinc, copper, and uranium mines.


 

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