A slightly higher than anticipated domestic growth rate of 5.7 percent in 2015, which was higher than the expected 4.5 percent but still lower than 6.4 percent experienced in 2014, was announced by the Bank of Namibia last week.
“These figures are well above market expectations and our own expectations, where we had forecast growth of 4.9 percent. Therefore the economy continues to defy expectations amidst significant headwinds emanating from the global economy. These headwinds have negatively affected the export sectors. However, strong domestic demand in the trade, financial, construction, water and electricity (sectors) sustained excellent growth amidst the global economic slowdown,” said Namene Kalili, Senior Manager Research and Development, at FNB Namibia Holdings.
Kalili noted that economic growth benefited from low inflation (3.5 percent) and an even lower change in the gross domestic product (GDP) deflator (0.1 percent). GDP deflator measures the inflation of export commodities.
“Although (the) savings rate is down slightly, it is in relation to the rising interest rate environment and was to be expected, while investment expenditure grew to N$49 billion. The growth in investments over and above the slowdown in savings rate, indicates that the economy was able to attract significantly higher foreign direct investment (FDI) in 2015. From a sectoral perspective, agriculture contracted by 10 percent, while mining was flat, despite the massive increase in gold production. Strong construction, water and electricity growth ensured that the secondary sectors grew by 8 percent, while the rest of the secondary sector performed dismally. The tertiary sectors decelerated to 5.9 percent growth, reflective of most sub-components performance, with public administration and defence posting the highest growth,” said Kalili.
He projected that growth will decelerate in 2016 due to the pronounced impact of the global economic slowdown, limited economic stimulus from government, rising interest and “the eminent South African downgrade to junk status. The slowdown is transitory, recovering mildly in 2017 and returning to high growth in 2018,” he forecast.
He added that the economic slowdown is the opportune time to sharpen pencils and rethink the growth strategy. “The country is blessed with natural sun, and embracing solar energy and liberalising the energy sector to allow competitive development and revolutionise the country’s energy sector can be the biggest contributor to economic growth. The economy needs to rebalance from a consumption-led to an export-led economy. This would ensure that the economy produces more than it consumes, resulting in massive increases in savings and investments and therefore unlock long-term development of new industries.
“This would also ensure that we benefit from the depreciating rand as this would translate into higher income in local currency terms from our exports, while making our goods more competitive on the global market.
“More importantly, we would accumulate substantial foreign reserves well beyond the required import cover, allowing the excess to be invested on the global capital market to generate new revenue streams for the country.
“The increased focus on tertiary and vocational education and the increased support for the students assistance fund could not have been timed any better, as it would provide the necessary skills to rebalance and restructure our economy from 2020 and beyond during these times of economic slowdown,” said Kalili.