Commentators believe demand for local major exports will likely increase as the country pins its hopes on international trade and world output to recover from a disastrous 2020.
According to Postrick Mushendami, deputy director of macro models and financial stability at the Bank of Namibia, the global economy is projected to rebound by close to 5%.
He said with this projection, the demand for Namibian major exports is going to increase.
“We expect demand for bigger sectors such as the diamonds and uranium to increase, supported by the global output. We expect slower growth in some sectors, such as the tourism sector, even if international tourism has opened. We still expect tourism to be severely affected going forward,” Mushendami explained this at a panel discussion about economic growth this week.
In terms of the economic outlook for 2020 and 2021, the Bank of Namibia projects the economy to decline by 7.8% in 2020 before the rebound.
Mushendami outlined sectors supporting these gross projections, such as the mining, tourism, agriculture in terms of livestock marketing, and the construction sector, are hardly significantly affected by the pandemic.
During the discussion, Mally Likukela, an economist and owner of Twilight Capital, cautioned that people should be careful with the narrative on what affected the economy.
He said it is not Covid-19 per se, but it is the measures that were put in place to control the pandemic.
Measures such as restriction on movement, closure of borders, ban of alcohol sales, and sectors that rely on those activities were hardly hit by Covid-19.
The tourism and travel sector was the hardest hit during the second quarter, contracting by close to 64%, compared to the last contraction in 2019. According to Likukela, this is a massive contraction and it should be remembered that such a contraction should not be looked at by the number it carries but its consequences. Through such a contraction, many businesses are likely to lose revenue and many employees are to lose their jobs. Only three sectors out of the 16 sectors that are accounted for in the domestic economy recorded positive growth for the second quarter; these sectors are agriculture, information and technology, and the health sector.
He said these are the sectors that benefited from the stimulus package. Likukela alluded that the economy is likely to take two to three years to be fully employed but the damage of the pandemic has to be fully assessed before projecting the exact date for the recovery.
Since the outbreak of Covid-19, Namibia was already in high debt, and the pandemic forced Namibia to continue borrowing, thereby gradually affecting sustainability of the fiscal position in terms of repaying this money.
“It will also negatively affect the ability of the government to use fiscal policy to respond to macroeconomic disturbances. We are close to 60% debt-to-GDP ratio, meaning the space that the government can find money to respond to immediate needs is getting smaller,” said Likukela.
He stated that since the arrival of Covid-19, the government has preoccupied itself with activities that earmarked to mitigate the effect of the pandemic, the government involved the monetary authority to support the financial sector in cutting the repo rate and relaxing some regulations in the financial sector.
Furthermore, Mushendami said the government had no choice but to find ways to save the population by incurring additional debts.
“Going forward, there is a commitment from the government, as it has intensified the efforts in terms of mobilising resources; that is actually through the appointment of NamRA CEO. We expect that revenue collection is going to increase through NamRA and we think the deficit is going to be managed in the long run,” he stated.