Analysts respond to data on Q2 economic contraction

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Edgar Brandt

Windhoek-Recently-released Gross Domestic Product (GDP) statistics by the Namibia Statistics Agency (NSA) for the second quarter of 2017 indicate that the domestic economy continued to contract at the same pace as in the first quarter of the year, namely by 1.7 percent compared to the second quarter 2016.

“The contraction of 1.7 percent in [the second quarter] is still subject to revision. We expect it to be revised upwards to -1.0 percent as we initially forecasted,” said Frans Uusiku, an economist at Simonis Storm Securities.
Uusiku expects continued firm economic recovery in the agriculture, mining and manufacturing sectors.

“The manufacturing sector would be driven mainly by the downstream sectors of the mining sector, such as polishing of mineral resources. At the same time, we expect the full effect of additional cash injection by government of N$3 billion into the economy to be realised by end of the [third quarter]. This should support spending and therefore ease the contraction in the wholesale and retail trade sector,” Uusiku noted.

The most recent data from the NSA, released last Thursday, also revised first quarter 2017 GDP data upward by one percentage point to -1.7 percent.

In addition, most economic sectors showed a stronger performance in the first quarter than previously estimated.
The estimates for the agricultural sector were adjusted up from 10.5 percent to 11.2 percent, for mining from 16.8 percent to 18.7 percent, for manufacturing from -10.7 percent to -2.5 percent and for hotels and restaurants from -9.3 percent to 7.3 percent.

However, the fishing sector faced more challenges in the first quarter and growth projections in the sector were consequently revised downward from 4.6 percent to 1.1 percent.

Klaus Schade, an executive at the Economic Association of Namibia, said: “The quarterly GDP data show a number of encouraging developments. After three years of drought over the past four years, the agricultural sector is recovering and is showing strong growth, albeit starting from a low basis.

“We expect the agricultural sector to maintain this performance throughout 2017. The stronger performance of the mining sector is also encouraging, in particular the increase in diamond, zinc and uranium production, which will have a positive impact on exports.

“Furthermore, increased mining output will benefit the transport sector (including cargo handled at the ports) that performed better in the second than in the first quarter.”

Schade went on to say despite the continuing contraction of the construction sector, which has an impact on construction-related manufacturing activities, such as metal fabrication, the manufacturing sector actually recorded positive growth.

“The construction sector will feel the full impact of government’s budgetary alignments this year. The job losses in this sector will have a negative impact on the wholesale and retail trade sector that contracted over the past three quarters. The recent drop in interest rates will, however, relieve some pressure on consumer spending,” Schade added.

Claudia Boamah, an economic analyst at Capricorn Asset Management, said Namibia’s economic downturn is proving hard to shake off, as the second quarter GDP remains in the realm of negative growth.

“Contractions in construction (-51.9 percent) continue to weigh down on our recovery prospects. All industries with the exception of agriculture and mining experienced declines in growth and further intensified the effect of the construction industry on overall quarterly growth,” Boamah said.

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