Windhoek-The Namibian economy is in an industrial recession, according to Namene Kalili, senior research and development manager at FNB Namibia Holdings.
A recession is defined as a slowdown or contraction of economic activities. In the case of Namibia this contraction has mainly affected industrial activities.
“Manufacturing growth has slowed down and negative growth has been experienced in the metals, construction and milling sectors,” Kalili said last week during a Global Market Seminar hosted by Rand Merchant Bank (RMB). He added that he expects the “industrial recession” to continue for the rest of 2017.
During his presentation on the Namibian economy Kalili noted that the domestic economy was expected to have grown a minimal 0.2 percent in 2016, compared to a much more respectable 6.1 percent in 2015.
“In 2017 we expect domestic growth to be driven largely by exports, while in 2018 growth is expected to be driven mostly by new investments. Sectoral growth in 2017 is expected to be driven by the mining sector,” said Kalili, noting that most commodity prices have stabilised and are picking up.
This development in terms of global commodity prices is expected to result in positive turnovers for most mining companies in the country.
Commenting on the nation’s fiscal position, Kaili cautioned that 35 percent of government debt would be maturing within the next 12 months.
“Government has borrowed to the hilt and it is struggling to service this debt,” he said, further warning that savings were also not being generated in the economy and in order to grow the local economy it is quite likely that government will have to borrow more.
However, last week Finance Minister Calle Schlettwein said government has broadened its budget deficit-financing plan to tap into the credit strength of the African Development Bank (AfDB).
“The potential financing plan from this facility over the MTEF (Medium Term Expenditure Framework) amounts to ZAR10 billion (N$10 billion), with ZAR4 billion (N$4 billion) for project financing and ZAR6 billion (N$6 billion) for the general budget deficit financing over a two-year period,” said Schlettwein in a statement on the state of the economy in a regional context.
He added that the credit facility from AfDB had eased the tightness in public finance and showed that the budget is fully funded. “Cash flows are, however, tight and are anticipated to remain so in the foreseeable future,” Schlettwein said.
The finance minister added that the South African economy, which accounts for 70 percent of Namibia’s imports and 90 percent of imports in the SACU area, has entered into a technical recession, following two consecutive quarters of negative growth, a negative 0.3 percent for the fourth quarter of 2016 and a negative 0.7 percent for the first quarter of 2017.
Schlettwein went on to say persistent low growth for the South African economy, especially the recorded contractions in manufacturing, retail trade and final consumption demand, held potential negative ramifications for the Namibian economy, SACU and the Common Monetary Area regions through trade, currency volatility and public debt.