Slight improvement in domestic economy

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The improvement of the domestic economy during the first quarter was largely registered in the sectors such as construction, transport and communication. Photo: Emmency Nuukala

Staff Reporter

WINDHOEK – Activities in the domestic economy improved somewhat during the first quarter of 2018, compared to the same quarter of 2017, although the overall performance was still weak. According to the Bank of Namibia’s (BoN) quarterly bulletin for January to March 2018, the improvement was largely registered in the sectors such as construction and transport and communication.

The central bank’s report also indicated that activities in the construction sector ticked up during the period under review, supported by higher construction works for both government and the private sector. Moreover, the activities in the transport and communication sector rose as reflected in the increased cargo volumes and real value addition in the telecommunication subsector.

“Wholesale and retail trade sector also registered a marginal increase in real turnover, after two years of decline. In addition, overall production in the mining sector continued to grow, driven by strong increases in diamond and uranium output. The agriculture sector also registered an increase in marketing activities, as reflected in the high number of cattle marketed over the period under review. Similarly, the production index for the manufacturing sector increased during the same period. Declines were, however, observed in the tourism sector and the electricity subsector during the first quarter of 2018, compared to the corresponding quarter of 2017,” said Kazembire Zemburuka, BoN’s Deputy Director for Corporate Communications.

Zemburuka further note that Namibia’s overall inflation decelerated during the first quarter of 2018, compared to the corresponding period during 2017, mainly due to a sharp decline in inflation for food and housing. Inflation slowed to 3.5 percent during the first quarter of 2018, from 7.7 percent during the corresponding quarter of 2017. “The slower price growth was mainly as a result of a significant deceleration in inflation for the categories food and non-alcoholic beverages as well as housing during the period under review. This was mainly on account of the favourable exchange rate and improved agricultural production coupled with a sharp decline in rental payments for dwellings during the period under review,” said Zemburuka in a statement issued on Friday.

In the monetary and financial area, BoN noted that growth in money supply (M2) rose during the quarter under review, driven by acceleration in the net foreign assets of depository corporations, coupled with growth in domestic claims, whereas credit extended to the private sector remained subdued. Year-on-year growth in M2 rose to
7.7 percent at the end of the first quarter of 2018, from 1.5 percent at the end of the same period last year. Growth in credit extended to the private sector slowed to 5.7 percent at the end of the first quarter of 2018 from 7.8 percent at the end of the corresponding quarter of 2017. The slower growth in credit extended to the private sector was reflected in the reduced growth observed in most of the credit categories for both the household and corporate sectors during the review period.

On the fiscal front, government’s total debt stock increased during the 2017/18 fiscal year, reflected in both the domestic and foreign debt. As a result, government’s total debt stock as a percentage of GDP increased to 41.3 percent at the end of the 2017/18 fiscal year, from 39.5 percent a year earlier. Similarly, government loan guarantees as a ratio to GDP increased from 5.2 percent to 6.1 percent over the same period but remaining well below the threshold of 10.0 percent.

With regard to external sector developments, Namibia’s current account deficit narrowed during the first quarter of 2018. The current account deficit improved to N$521 million in the first quarter of 2018, compared to a higher deficit of N$814 billion in the first quarter of 2017. This was primarily attributed to a lower merchandise trade deficit, coupled with increased receipts on the secondary income account. The stock of international reserves increased, year-on-year, during the quarter under review, partly driven by the impact of the African Development Bank loan inflow coupled with the repayment of debt by the Banco Nacional de Angola, higher SACU receipts and lower imports. This resulted in an increase in the level of import cover to 4.5 months at the end of the quarter under review, compared to 3.6 months at the end of the corresponding period of 2017. Namibia’s International Investment Position (IIP) recorded an increased net liability position over the same period.

In terms of the exchange rate, the Namibia Dollar appreciated against the US Dollar, year-on-year, but depreciated against the Pound and Euro during the first quarter of 2018. The annual appreciation of the Namibia Dollar/South African Rand against the US Dollar was partly due to political developments in South Africa and economic uncertainty in the United States. The depreciation of the Namibia Dollar against the Pound and Euro was partly driven by the easing Brexit uncertainty and the improving economic activities in the Euro Area,
respectively.

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