Economy Buoyant Despite Setbacks

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By Stanley Kwenda WINDHOEK The Namibian economy is set to end the year on a dip but prospects for growth remain bright for the coming years. A recent report released by a local financial institution is upbeat about growth prospects for the economy, but predicts that the country’s economy will recede by 0.4 percent by the close of the year, registering a negative economic growth of 3,4 percent as compared to 3,8 which was realised in 2005. “Namibia’s growth rate is forecast to reduce to 3,4 percent, in line with subdued global developments, including a reduced demand for minerals and other products,” reads First National Bank Namibia’s 2006 annual report. The strength of the Namibian dollar against a basket of other major trading currencies and the reduced output in the fishing industry due to high oil prices on the international market are some of the factors contributing to the poor performance of the country’s economy during the year under review. “The performance of the manufacturing sector tends to be cyclical and is affected by developments in the fishing and agricultural sectors. The outlook for this sector is also affected by a contraction in the beverage industry and challenges facing the textile industry,” said local economist, Martin Mwinga. High oil prices on the global market are also expected to increase production costs and impact negatively on the economy. Despite all the negative pointers, prospects for growth remain high largely due to a tight fiscal policy put in place by the government. The bright economic outlook will also be aided by the country’s policy of global integration into the global economy.” “Government’s policy on integrating Namibia into the global economy is meeting with success. It is reflected in improved macroeconomic management, a broad improvement in inflation performance and the synchronisation of Namibia’s business cycles with global cycles,” said Mwinga. He however sounded a warning on the need to revise immigration laws, which have of late been taking a hardline stance on foreigners, a move which has had a negative impact on the amount of direct investments coming into the country. He said, “Negative factors that need to be addressed urgently to enhance international competitiveness include restrictions on work permits for skilled foreign nationals and high company tax rates. Imposing visa requirements on business executives from South Africa (Namibia’s major trading partner) continues to detract from an otherwise investor-friendly environment.” Economic outlook for 2007 however remains buoyant following a recent investment rating from Fitch, which has encouraged a positive outlook for the Namibian economy. Following this rating, the International Monetary Fund (IMF) has also put its faith into the economy predicting a “bullish” outing for the next five years. “Despite the gloomy international outlook which will impact Namibia, the group remains optimistic that there are opportunities for real growth in the Namibian economy.