Drought derails economic recovery
Naufiku Hamunime - The Namibian economy slumped further into recession in 2019 as external and internal headwinds derailed growth and laid the foundation for three consecutive years of economic contraction.
Following initial projections that the economy would bottom out of contraction with positive growth of 0.3% in 2019, a weaker-than-expected performance in the primary industry during the first half is expected to result in a gross domestic product (GDP) contraction of 1.7% in 2019.
If it materialises, this negative growth will not only signify the country’s third consecutive economic contraction, but also, the steepest since independence.
Half-year performance
According to the Namibian Statistics Agency (NSA), the economy contracted by 2.9% and 2.6% during the first and second quarters of 2019 respectively.
The contractions primarily emanated from the agriculture, construction, hotels and restaurants, as well as the mining sector.
However, the worst performing sector of the period was agriculture which registered negative growth of 31% and 28% during the first and second quarters respectively. Due to the severity of the drought - officially declared a state of emergency in May 2019 - the agriculture sector is now expected to contract by 17.5% as a result of fewer hectares being planted, as well as numerous livestock deaths.
Looking forward, the Bank of Namibia (BoN) and the International Monetary Fund (IMF) expect GDP growth to remain subdued in the short term, only rising above 1% in 2021.
Low productivity growth and stagnant competitiveness are downside risks that will likely continue to threaten the growth outlook in the short to medium term, along with, lower-than-expected revenue from the Southern Africa Customs Union (SACU), domestic revenue underperformance and the risk of possible fiscal slippages that could potentially undermine policy credibility and debt sustainability.
Government and public policy
The government has made attempts to manage the weakness of the economy through fast-tracking policy reforms aimed at increasing investor confidence and attracting private sector and bi-lateral investment.
For example, at the 2019 Economic Growth Summit held in August, numerous policy pronouncements pertaining to everything from revising the New Equitable Economic Empowerment Framework (NEEEF), committing to review the Procurement Act, and instituting visa reforms. Investment pledges of as much N$20 billion were made.
However, even coupled with the fiscal consolidation efforts, these policy reforms remained insufficient to deter Fitch Ratings from downgrading the sovereign from BB+ sub-investment grade with a negative outlook (assigned in 2017), to a BB sub-investment grade with a stable outlook in October 2019.
As the year draws to a close, 2019 is set to mark the lowest point in what is rightly expected to be a prolonged journey towards sustained economic growth and recovery.
* Naufiku Hamunime is an economist at Standard Bank Namibia.
Following initial projections that the economy would bottom out of contraction with positive growth of 0.3% in 2019, a weaker-than-expected performance in the primary industry during the first half is expected to result in a gross domestic product (GDP) contraction of 1.7% in 2019.
If it materialises, this negative growth will not only signify the country’s third consecutive economic contraction, but also, the steepest since independence.
Half-year performance
According to the Namibian Statistics Agency (NSA), the economy contracted by 2.9% and 2.6% during the first and second quarters of 2019 respectively.
The contractions primarily emanated from the agriculture, construction, hotels and restaurants, as well as the mining sector.
However, the worst performing sector of the period was agriculture which registered negative growth of 31% and 28% during the first and second quarters respectively. Due to the severity of the drought - officially declared a state of emergency in May 2019 - the agriculture sector is now expected to contract by 17.5% as a result of fewer hectares being planted, as well as numerous livestock deaths.
Looking forward, the Bank of Namibia (BoN) and the International Monetary Fund (IMF) expect GDP growth to remain subdued in the short term, only rising above 1% in 2021.
Low productivity growth and stagnant competitiveness are downside risks that will likely continue to threaten the growth outlook in the short to medium term, along with, lower-than-expected revenue from the Southern Africa Customs Union (SACU), domestic revenue underperformance and the risk of possible fiscal slippages that could potentially undermine policy credibility and debt sustainability.
Government and public policy
The government has made attempts to manage the weakness of the economy through fast-tracking policy reforms aimed at increasing investor confidence and attracting private sector and bi-lateral investment.
For example, at the 2019 Economic Growth Summit held in August, numerous policy pronouncements pertaining to everything from revising the New Equitable Economic Empowerment Framework (NEEEF), committing to review the Procurement Act, and instituting visa reforms. Investment pledges of as much N$20 billion were made.
However, even coupled with the fiscal consolidation efforts, these policy reforms remained insufficient to deter Fitch Ratings from downgrading the sovereign from BB+ sub-investment grade with a negative outlook (assigned in 2017), to a BB sub-investment grade with a stable outlook in October 2019.
As the year draws to a close, 2019 is set to mark the lowest point in what is rightly expected to be a prolonged journey towards sustained economic growth and recovery.
* Naufiku Hamunime is an economist at Standard Bank Namibia.
Kommentaar
Republikein
Geen kommentaar is op hierdie artikel gelaat nie