… but headwinds persist
WINDHOEK – According to The Bank of Namibia (BoN) while the global economic outlook remains weak there are some signs of improvements particularly in the United States and Japan. Meanwhile, leading emerging economies are slowing despite growing at relatively higher rates.
The US economy is also showing signs of improvement as reflected in their improved labour market conditions and their recovery in the housing market, which is at a two year high. Despite these positive signs BoN feels that the global economy continues to face a number of downside risks going forward. These include, but are not limited to the uneven economic recovery among advanced economies that would exert further downward pressure on international commodity prices. In fact, the International Monetary Fund (IMF) has also lowered its global economic growth forecast for 2013 to 3.1 percent from its April forecast of 3.3 percent, largely reflecting weaker than expected economic performance in the Euro area and emerging market economies.
On the home front the risks to the Namibian economy include the fragile state of the world economy, declining international commodity prices and adverse climatic conditions that have resulted in the current drought in most parts of the country. Moreover, while the depreciation of the Namibia dollar against major currencies may not have an immediate impact on the volume of mineral exports and imports, it may pose inflationary pressures going forward and this warrants close monitoring. BoN expects Namibia’s economy to grow by 4.7 percent in 2013, compared to the 5 percent growth experienced in 2012.
The central bank predicts that the domestic economy will then expand to 5 percent growth in 2014. According to the outlook the Namibian economy performed slightly better than expected in 2012 mainly due to higher than expected diamond and uranium production, as well as resilient growth of the wholesale and retail trades.
“The results in diamond production were mostly due to significant increases in diamond output from the offshore operations of the rehabilitated Elizabeth Bay mine, coupled with an improved market demand for the precious stone in emerging markets and sustained demand in the United States market. Moreover, there was a significant resumption in uranium extractive activities boosting production in the subsector,” according to the latest outlook.
The central bank further expects headline inflation to average 6.1 percent in 2013 and expects the fiscal deficit to increase from 3.8 percent in 2012 to 5.3 percent in 2013, before declining to 4.4 percent of Gross Domestic Product (GDP) in 2014. “Fiscal projections reflect a marginal increase of the fiscal deficit included in the latest Medium Term Expenditure Framework (MTEF), as well as the impact of the recent personal income and non-mining corporate tax reform.
By Staff Reporter