• September 20th, 2018
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Indebted consumers to feel the pinch in 2016

Windhoek A bleak outlook for consumers is predicted for 2016 with increases expected in inflation and interest rates. This is according to local stock brokerage firm, Simonis Storm Securities (SSS), which presented its outlook for the Namibian economy during a breakfast session in the capital yesterday. “We expect Namibia’s Gross Domestic Product (GDP) growth to decline to 4.75 percent in 2016. We also expect the Bank of Namibia to follow suit with an increase in interest rates, just like South Africa did at the end of 2015,” said Frans Uusiku, senior research analyst at SSS. Inflation, which Uusiku expects to be driven mainly by food inflation, is expected to reach 5.3 percent this year. He also noted that a further weakening of the South African Rand is expected. “Debt, which is mainly driven by household debt, is also a major concern, and indebted households will definitely feel the pinch this year,” Uusiku noted. Bruce Hansen, managing director at SSS, told the breakfast gathering that his firm is particularly concerned about water and electricity supply constraints, low global demand for commodities, as well as foreign reserves - which are under pressure. However, fears about dwindling foreign reserves were shot down by Deputy Governor of the Bank of Namibia Ebson Uanguta, who said that while last year’s foreign reserves stood at 1.5 months of import cover, this year import cover stands at 3.5 months. This was achieved by the Eurobond issued by BoN last year, an asset swap with certain local institutions and the depreciation of the Namibia Dollar against major currencies, specifically the US Dollar. “However, the demand on reserves, through activities such as infrastructure development, has not been eliminated,” Uanguta warned. Both Uanguta and seasoned economist and analyst Johannes !Gawaxab agreed that delinking the Namibia Dollar from the Rand is not a viable option right now. “Despite the volatility of the Rand, it is still the best possible arrangement right now,” said Uanguta. “It would be political and economic suicide to try and delink at this stage. However, I would like to know to what extent we are looking at alternative pegging arrangements,” !Gawaxab said. Hansen also touched on the South African economy, which he said faces a slowdown in GDP growth, estimated at 0.9 percent for 2016, compared to 1.4 percent in 2015. He noted that South Africa risks a downgrade by international rating agencies and can expect a repo rate increase, higher food inflation, a widening trade deficit and must deal with the effects of a regional drought. On the global front, growth is expected to contract and Hansen said he was particularly concerned about the continued slowdown in the Chinese economy, low commodity prices and a slowdown in industrial growth in emerging economies.
2016-01-21 09:57:26 2 years ago
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