Economy Cooled Last Year – BoN

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By Charles Tjatindi

WALVIS BAY

Economic growth in Namibia is estimated to have slowed to 3.8 percent during 2007, from 4.1 percent the preceding year. This is contained in the annual report of the Bank of Namibia (BoN) for the year 2007 which was launched here Monday.

The report attributes the decline partly to declining growth in the global economy, which fell by 0.1 percent from 5 percent to 4.9 percent over the same period. Similarly, economic growth in South Africa slowed by 0.3 percent to 4.7 percent.

According to the report, it is a plausible conclusion that Namibia continues to be driven by economic developments in her major trading partners, not only in the SADC region, but in economies elsewhere as well.

The annual report reveals that persistent inflationary pressures were witnessed in Namibia, owing mainly to high food prices and high and volatile international oil prices. The annual average inflation rate for 2007 was 6.7 percent – higher than the annual average rate of 5.1 percent recorded the preceding year.

To contain the inflationary pressures, the Bank of Namibia tightened the monetary conditions by increasing the Bank rate by a total of 150 basis points during 2007.

The growth in real GDP during 2007 was relatively broad-based as all major industries recorded positive growth rates. The secondary industries, in particular performed well during the year under review, while the
performance of the primary industries slowed during this period.

The report states that the economic growth decline experienced in primary industries was due to lower diamond production. Diamonds remain one of the backbones of the Namibian economy, accounting for roughly 8.0 percent of the total GDP, and 38.0 percent of the primary industries output.

Consequently, the developments in diamond mining have a profound influence on the Namibian economy.

According to the report, value added growth of diamond mining declined by 0.3 percent in 2007, from 25.2 percent in the preceding year. Diamond mining output for Namibia in 2008 is however projected to grow by 6.1 percent, driven by offshore mining and high world demand.

Other industries in the primary sector also produced weak results, with agriculture and forestry’s pace of growth slowing down to 3.2 percent from 4.2 percent. The performance of the fishing sub-sector continues to worsen, albeit at a lower rate of decline of 0.4 percent compared to 4.8 percent recorded during the preceding year.

The lower decline in fish catches relative to the previous year was mainly supported by the improved size of fish catches – especially hake – and higher fish prices. Although the general outlook of the fishing sector is a mixed one, according to the annual report, outlook for the hake stocks in particular is positive due to expected improved stock and prices.

The secondary industries, unlike their counterparts from the primary sector, performed remarkably well, with value added growth of 5.9 percent in 2007 compared with 0.3 percent in 2006.

This marked the highest growth since the record-high 9.5 percent growth four years ago. The sub-sectors of manufacturing and of electricity, gas, and water were mainly responsible for this growth.

In 2007, the manufacturing sub-sector increased by 4.9 percent from a decline of 8.3 percent in the preceding year. Over the same period, the report states, the electricity, gas and water sub-sector improved by recording a growth of 3.5 percent in contrast to a decline of 5.1 percent the previous year.

Overall, the report highlighted, the domestic economic conditions in the Namibian economy remained favourable in the year under review. According to the annual report, this was reflected in record high surplus on the overall balance of payments and the first ever surplus in the fiscal sector.

The launch of the BoN annual report for 2007 was presented by the BoN’s Deputy Governor, Paul Hartmann, and was amongst others attended by representatives of various industries.

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