…nothing to worry about
The economic cycle is an integral part of all money-based economies as opposed to the barter-based systems. Provided Namibia continues to show healthy signs of recovery, there is really nothing to worry about in terms of investor confidence and therefore the economy will undoubtedly withstand the prevailing economic headwinds, says Standard Bank’s Business Support Officer Anton Mushongo.
Mushongo says that consumer and investor confidence in the Namibian economy looks fairly bleak following numerous economic phenomena in the past few months. This includes a tight monetary stance (increases in prime lending rate), and revised Gross Domestic Product (GDP) growth to less than 2 percent growth in 2016. Other headwinds include low commodity prices especially diamonds and uranium, weak performance in the construction industry, the downgrade of Namibia’s economic outlook by the international rating agencies and of course, government revenue streams that are seemingly running dry. These are among the major highlights that have contributed to the loss of confidence by consumers and investors in the Namibian economy.
“One thing is certain, there is no economy in the world that follows a straight growth path; all economies fluctuate over time. The conceptual perceptions of fluctuations in the economy thus commonly refer to the periods of expansion and contraction in the levels economic activity, usually measured by GDP. This over time trend is known as the Business Cycle or Economic Cycle,” Mushongo said.
Using data provided by the Bank of Namibia, Mushongo pointed out that Namibia’s Real GDP at market prices shrank 4.3 percent year-on-year in 2016, closing off at a revised 1.0 percent. The year 2015, recorded growth of 5.3 percent year-on-year, which was 1.2 percent lower than the 6.5 percent recorded in 2014 – a year in which economic activity peaked after 2010.
However, Mushongo noted that after years of pro-cyclical fiscal policy, consolidation as part of the government’s fiscal and monetary policy measures were deemed necessary to cool off an overheated economy.
“Despite Fitch’s revised Sovereign Credit Rating from stable to negative for Namibia, the country remains credit worthy. The government’s ability to secure an N$10 billion loan from the African Development Bank to sustain its expenditure programmes is one factor that supports this notion. There are many other ways we can justify Namibia’s credit worthiness, such as the level of Government Debt/GDP ratio, which may have exceeded the 35 percent benchmark, but remains within sustainable boundaries, and the country’s risk of default shows a considerable non-default history. Painful, but necessary measures have been put in place by the Government to consolidate spending. In the budget speech tabled this year, it was revealed that the 2017/18 budget would reduce the budget deficit to approximately 3.6 percent of GDP, down from an estimated 6.3 percent in 2016/17, while stabilising public debt at around 42 percent of GDP,” Mushongo noted.