Growth data mostly promising

Namibia’s gross domestic product per capita - a metric of individual wealth - has bounced back to its pre-pandemic levels and has consistently shown strong growth since 2021.Using the latest figures released by the Namibia Statistics Agency (NSA), Simonis Storm (SS) says the country’s GDP reached an “impressive” N$15 326 per capita in the second quarter of this year.“This indicates that economic output has increased at a faster pace than the population growth,” SS said in their analysis of the new economic growth data.Moreover, serving as a measure of labour productivity, GDP per hour has surpassed its pre-pandemic levels, recording a year-on-year (y/y) increase of 4% in the past quarter. While these metrics indicate a more effective economy, capable of producing greater quantities of goods and services with the existing labour force, capital and human expertise, the challenge of high unemployment remains unresolved, SS pointed out.GrowthAccording to the NSA, Namibia’s nominal GDP in the second quarter of 2023 amounted to N$58.635 billion. In real terms, GDP totalled nearly N$38.778 billion.In the corresponding quarter in 2019, nominal GDP, or GDP at current prices, stood at N$44.279 billion. Real GDP, or GDP measured at constant 2015 prices, totalled N$36.445 billion.In the second quarter of 2023, nominal GDP has surged by an impressive 32.4% compared to the same period in 2019. However, real GDP has shown limited growth during the same timeframe, with only a 6.4% increase. According to SS, this stark difference underscores how inflation has gradually eaten into economic expansion, resulting in a notable gap of approximately 26 percentage points since the second quarter of 2019. Encouragingly, SS’ current expectations of inflation slowing down in the latter half of 2023 seem to be coming true, and the analysts anticipate this trend continuing until the year&#039;s end.DriversGDP is calculated by adding up consumption, investment, government spending, and net exports.On an annual basis, the only components that experienced growth in the past quarter were government spending (up by 0.6% y/y) and net investment (surging by 31.2% y/y). These two factors drove overall GDP growth, SS noted.However, private consumption expenditure decreased by 4.2% y/y, while net exports fell by 6.4% y/y, exerting a negative influence on GDP in the second quarter.Although real consumption spending (adjusted for inflation) decreased on an annual basis, private spending displayed resilience by increasing 6.8% quarter-on-quarter (q/q) during the period under review. “This unexpected trend suggests that individuals and households are still willing to spend, despite rising living costs and increasing interest rates,” SS said.SpendingHouseholds have consistently remained net borrowers of credit, while corporations have been actively reducing their debt. This suggests that the growth in private consumption might be influenced by increased household borrowing, the analysts added. This pattern is also evident in the improved performance of wholesale and retail trade. This sector grew by 8.2% y/y compared to 2.1% y/y in the second quarter of 2022. At current prices, the sector pumped nearly N$6.8 billion into the economy in the past quarter, compared to about N$5.8 billion a year ago.Private consumption accounted for a significant 82.7% of GDP in the second quarter, underscoring the ongoing demand for goods and services and the continued spending by individuals and households, SS said.CreditThe latest figures of the Bank of Namibia (BoN) show that other loans and advances – which include personal loans and credit card debt - remain the driver of household credit growth. In July, it surged by 15.9% or N$1.6 billion y/y.“This is again largely driven by short-term credit demand from individuals, with the largest driver of the year-on-year figure being the uptake in personal credit lines during October and November 2022 after the civil service wage adjustment,” Cirrus Capital commented.Overdraft credit in July posted stronger growth of 6.1% y/y.By the end of July, consumers owed local commercial banks about N$11.9 billion in other loans and advances, while their overall overdraft debt was nearly N$2.5 billion. Compared to July 2022, these figures increased by about N$1.6 billion and N$142.7 million, respectively.A TransUnion report released last week, showed 45% of surveyed Namibians anticipate being unable to pay their current bills and loans in full.The latest NSA data showed the financial services activities sector experienced a decline of 2.6% y/y in real value added, in contrast to a growth of 11.4% witnessed during the same quarter last year.“The poor performance emanates from the banking subsector that registered a decline of 5.2% in real value added compared to 6.5% growth recorded in the same quarter of 2022. This is attributed to a deceleration in total deposits from all sectors of the economy i.e. household, government and private sector,” the NSA said.InvestmentGross fixed capital formation (GFCF) performance slowed, registering a growth rate of 7.4% in the quarter under review, in contrast to the strong growth of 18.6% recorded in the corresponding three months last year.Although elevated interest rates were anticipated to hinder domestic investment, foreign direct investment managed to sustain net investment levels similar to those observed in 2022, SS said.Foreign direct investment (FDI) reached a record-breaking N$54.2 billion in the second quarter of 2023.During the first quarter of 2023, nominal GDP experienced a decline of 0.8% q/q. However, it made a notable recovery with a 2.4% q/q expansion in the second quarter of 2023. This shift in dynamics could result in a minor increase in fiscal indicators like the debt-to-GDP ratio, the budget balance as a percentage of GDP, or finance costs as a percentage of GDP, SS said.“It is anticipated that investors will welcome the fact that the second quarter of 2023 marks the ninth consecutive year of GDP expansion,” they added.TradeThe performance of net exports continues to weigh on GDP, given the weakness of the rand exchange rate, which inflates the import bill more than export earnings, SS said.In nominal terms, import of goods and services increased by N$1.7 billion in the past quarter, registering N$30 billion as opposed to the N$28.3 billion a year ago.In nominal terms, export of goods and services maintain an upward trajectory, showing a notable N$2.4 billion expansion in the quarter under review, after a total of N$18.2 billion was recorded during the second quarter in 2022.“Subsequently, the external balance for goods and services persists in its decline, recording a deficit of N$9.4 billion recorded in the second quarter of 2023, as compared to a shortfall of N$10.1 billion reported in the corresponding period,” according to the NSA.“Although the weaker rand exchange rate can benefit export earnings (as most exports are sold in US dollars), the decline in global commodity prices is expected to offset any improvements in the trade balance in 2023,” SS said.MiningMining and quarrying remained the gem of the Namibian economy.In nominal terms, the sector pumped nearly N$11.8 billion into the economy in the past quarter – the highest quarterly contribution to GDP in the NSA data series going back to 2013.It contributed 20.1% to nominal GDP. This means that for every N$5 generated in the economy in the past quarter, N$1 came from mining and quarrying.In real terms, the sector’s GDP contribution exceeded N$6.6 billion – about N$1.6 billion more than the second quarter of 2022 and another record-breaking figure.Y/y, the sector grew by 32%.The uranium subsector achieved impressive growth, with a 55.3% increase in real value added, in contrast to the 2.7% decline observed in the same quarter of 2022. This positive performance is attributed to a notable increase in uranium production, the NSA said.The metal ores mining subsector achieved a growth rate of 37.1% in real value added, surpassing the 28.1% growth recorded in the same quarter of 2022. The NSA attributed this to higher production of both gold and lead.Similarly, the “other mining and quarrying” subsector saw a notable acceleration with a 55.6% increase in real value added during the past quarter, in contrast to the 146.5% growth recorded in the corresponding quarter of 2022. Improved performance in the subsector can be attributed to heightened investments in mineral exploration activities, according to the NSA.Diamond mining saw a more modest growth rate of 9.4%, in contrast to the robust 52.3% growth recorded in the corresponding quarter of 2022. This change in performance is primarily due to the slower pace of diamond production during the period under review compared to the same quarter in 2022, influenced by a high base effect, the NSA explained.SentimentAccording to SS, economic sentiment has shown an upward shift, notably driven by the promising prospects offered by Namibia&#039;s green hydrogen and oil and gas sectors. “Nevertheless, amidst the multitude of information in the media, there remains an expectation to witness the actual realisation of these developments,” SS said.Strong momentum post the pandemic can only carry our economy for so long, the analysts cautioned.“Positive sentiment and mindsets have the power to turn things around, but this can lose steam if reforms, forward thinking ideas, embracing views of the youth and material signs of progress in addressing long overdue issues do not take place,” they added.

Growth data mostly promising

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Republikein 2025-06-18

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Growth data mostly promising

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