IMF predicts 4% GDP growth for 2018

Finance minister Calle Schlettwein has indicated that green shoots are always on the horizon. With the conclusion of a visit by the International Monetary Fund, Schlettwein will now feel vindicated.This week, the IMF led by economist Geremia Palomba said that the Namibian economy was on the path of recovery and was poised to register good growth for 2018. This comes off the back of sustained periods of low growth witnessed particularly in 2016, when growth figures pointed to a rather sombre 1.1%. Speaking at a press conference, Palomba said that the economy had entered an adjustment phase which took the wind out of the economy's sails owing to low commodity prices and fiscal consolidation measures on the part of the ministry of finance.“After years of exceptional growth, the economy has entered an adjustment phase. Growth is expected to turn slightly negative in 2017, compared to a growth of 1.1% in 2016, as large constructions in the mining sector have been completed and the government continues consolidating,” said Palomba. Growth is projected to resume in 2018 and accelerate thereafter to about 4% as production from new mines ramps up and manufacturing and retail activities recover. Downside risks to this outlook include volatile Southern African Customs Union (SACU) revenue, subdued commodity prices, and fiscal slippages that could undermine policy credibility. He applauded the Bank of Namibia for preserving financial stability. Last year, the IMF had warned the authorities of the possibility of a housing bubble to which the central bank responded positively by introducing loan-to-value ratios which make it compulsory for homeowners who plan to take up second or third mortgages to put up deposits for planned purchases. “Namibia's key challenges going forward are to manage the ongoing adjustment process and preserve macroeconomic stability, while reducing unemployment and income inequality. The government and the Bank of Namibia have already taken steps to reduce the fiscal deficit and preserve financial stability. However, fiscal and external vulnerabilities are rising and call for additional action.”Sounding a cautionary, Palomba said the finance ministry would have to rein in financing to ensure debt sustainability. Ratings agencies Fitch and Moody's both downgraded Namibia to junk status and pointed to elevated debt-to-GDP levels as the reason behind the unpopular move.“With SACU revenue declining, significant fiscal adjustment is needed to ensure debt sustainability and macroeconomic stability. Policies need to address the sources of recent deterioration, including public wage costs, and combine expenditure and revenue measures that can support long-term growth, while safeguarding critical social and development spending,” Palomba said. The IMF further encouraged monetary authorities to strengthen revenue administration and fair distribution of government funds, particularly to state-owned enterprises which have become popular for asking for constant bailouts. “Strengthening revenue administration, improving budget formulation and expenditure controls, and carefully managing extra-budgetary entities and public enterprises are critical steps to consolidate the fiscal accounts and secure a more equitable burden sharing,” Palomba said. The IMF will release its full assessment in the first half of the year, Palomba said.STAFF REPORTER

IMF predicts 4% GDP growth for 2018

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IMF predicts 4% GDP growth for 2018

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