SSS expects GDP growth of 2.4% in 2018

0
173

Edgar Brandt

Windhoek-Local stock brokerage and investment house, Simonis Storm Securities (SSS), expects Namibia’s Gross Domestic Product (GDP) for 2018 and 2019 to kick in at a lower pace of 2.2 percent and 2.4 percent, respectively.
This comes after SSS revised 2017’s GDP to negative 0.3 percent from a positive 0.5 percent previously estimated.
The downward revision for 2017 was prompted by a continuing slowdown in the construction sector.

“SSS’s Namibian Economic Outlook 2018 is guided by the theme ‘The Namibian New Normal?’. This is because Namibia is stuck in structural problems such as high unemployment (specifically, youth unemployment), shrinking private sector, overregulation of many industries, excessive increase in overall debt and lack of skills that is a drag on economic growth and widening income distribution.

“We only foresee a turn-around once Government takes a firm stand on fiscal consolidation and policies that are pro-growth. We believe that fiscal discipline needs to be exercised,” junior analyst at SSS Indileni Nanghonga explained.

Nanghonga continued that due to expected better rainfall in 2018, the agricultural sector is set to improve in 2018 while growth is also expected from the mining and manufacturing sector coupled with a strong growth from the tourism industry.

“We do expect the construction sector to remain a drag on GDP as government reduced the budget for capital expenditure,” she added.

A World Bank report, released at the start of the fourth quarter of 2017, stated that economic growth in Sub-Saharan Africa was recovering at a modest pace, and was projected to pick up to 2.4 percent in 2017 from 1.3 percent in 2016.

This rebound was led by the region’s largest economies. In the second quarter of this year, Nigeria pulled out of a five-quarter recession and South Africa, which has a direct bearing on Namibia, emerged from two consecutive quarters of negative growth.

“Improving global conditions, including rising energy and metals prices and increased capital inflows, have helped support the recovery in regional growth. However, the report warns that the pace of the recovery remains sluggish “…and will be insufficient to lift per capita income in 2017”.  

“Most countries do not have significant wiggle room when it comes to having enough fiscal space to cope with economic volatility. It is imperative that countries adopt appropriate fiscal policies and structural measures now to strengthen economic resilience, boost productivity, increase investment, and promote economic diversification,” World Bank Chief Economist for Africa Albert Zeufack noted.

Looking ahead, the World Bank projected that Sub-Saharan Africa should see a moderate increase in economic activity, with growth rising to 3.2 percent in 2018 and 3.5 percent in 2019 as commodity prices firm and domestic demand gradually gains ground, helped by slowing inflation and monetary policy easing.

The International Monetary Fund (IMF) suggested that fiscal consolidations in sub-Saharan African countries typically have a contractionary effect on output.

An IMF report noted that the composition of fiscal consolidation also matters, as cutting capital expenditures is much costlier in terms of output than cutting current expenditures or raising revenue.
“During episodes of investment-based fiscal consolidation, a 1 percentage point of GDP improvement in the fiscal position lowers output by 0.4 percent in the first year of consolidation, and by about 0.7 percent three years later.

“In contrast, during fiscal consolidations based on current expenditures and revenue, a 1 percentage point of GDP improvement in the fiscal position lowers impact on output by 0.1 and 0.2 percent, respectively.
“This suggests that countries in the region facing an urgent need to consolidate will have to implement policies that are likely to weigh negatively on economic activity. At the same time, they face difficult choices about the timing and speed of consolidation and what instruments to use,” the IMF report read.

LEAVE A REPLY

Please enter your comment!
Please enter your name here