WINDHOEK– If Namibians are indeed forward-looking thinkers then they need to know what the potential of any economic sector is and conduct the necessary research to establish the sector’s lifespan.
This is according to Claudia Boamah, an economist at Capricorn Asset Management, who yesterday advised that the country adopt a forward-thinking mentality, not just in terms of goals but also in terms of preparations that need to be completed in the processes of achieving long-term objectives.
“Mining, construction and hydro-electric power may have gotten us this far but maybe renewable energy, tourism and our human capital, should we choose to invest in their development, can be the main drivers of the economy for the next decade and another three or four sectors for the subsequent decade,” said Boamah, while presenting an outlook on the economy at an Old Mutual investment summit in the capital.
She noted that despite a 1.2 percent contraction of the Namibian economy in 2017, the International Monetary Fund maintains its outlook for the domestic economy to grow by 1.2 percent in 2018, 3.3 percent in 2019 and 3.5 percent by 2021.
Domestic forecasts, however, are considerably lower with the general consensus averaging 0.5 percent and 1.6 percent GDP growth in 2018 and 2019 respectively.
“The positive, albeit moderate, outlook stems in part from the fact that most of the factors that weighed down on the economy have diminished. The contractionary trend in construction finally reversed in quarter one of 2018,” Boamah observed.
Commenting on inflation expectations, she said the weakness in the housing market is expected to persist over the course of the year, thereby exerting significant downward pressure on the consumer prices index, thus leaving food, alcohol and tobacco and transport as the driving forces behind inflation.
“Food prices have consistently risen on a monthly basis. And so far, while the transport index has been volatile, global fuel prices are being forecast to stabilise above US$70 per barrel, hence the expectation for the index to rise. Therefore, all things being equal, our in-house forecast is for inflation to reach 4.5 percent by year end and average 4 percent for the year 2018. Inflation should rise even higher as the overall economy improves, thus we expect an average inflation of 5 percent in 2019,” said Boamah.
She further noted that interest rates are likely to remain as they are with a moderate chance of being raised early next year. “The forecasts for an improvement in growth suggests that expansionary monetary policy might no longer be necessary.
Additionally, in the interest of maintaining our Common Monetary Area membership, it would be advisable to pursue a cutting cycle while inflation is all set to increase. Furthermore, the hawkish stance of advanced economy central banks usually triggers a hiking trend within emerging markets as a defence against currency depreciation and capital flight.
In the absence of a currency blow-out or a sovereign credit rating downgrade, the repo rate could be kept at a growth supportive rate of 6.75 percent in 2018. We can look forward to a maximum of two 25 basis point hikes in 20-19, assuming the Federal Reserve Bank maintains their outlook on US inflation,” said Boamah.