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Heading into a decade of disappointments…pandemic expected to leave long-lasting adverse economic effects

2021-01-28  Maihapa Ndjavera

Heading into a decade of disappointments…pandemic expected to leave long-lasting adverse economic effects
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The Covid-19 pandemic has caused major and devastating disruptions in the global economy, from which the southern African region and Namibia, in particular, was not spared. Economic activity has been hit by reduced personal interaction, owing both to official restrictions and personal decisions.

According to the World Bank January 2021 outlook, uncertainty about the post-pandemic economic landscape and policies have discouraged investment. Disruptions to education have slowed human capital accumulation and concerns about the viability of global value chains and the course of the pandemic have weighed on international trade and tourism. 

“As with previous economic crises, the pandemic is expected to leave long-lasting adverse effects on global economic activity and per capita incomes. It is likely to steepen the slowdown in the growth of global potential output, the level of output the global economy can sustain at full employment and capacity utilisation that had earlier been projected for the decade just begun,” reads the outlook. 

The World Bank stated that unless there are substantial and effective reforms, the global economy is heading for a decade of disappointing growth outcomes. This is especially given weak fiscal positions and elevated debt as well as institutional reforms to spur growth.
The bank advised that a comprehensive policy effort is needed to rekindle robust, sustainable and equitable growth. A package of reforms to increase investment in human and physical capital and raise female labour force participation could help avert the expected impact of the pandemic on potential growth in emerging and developing economies over the next decade. 

According a local economist to Robert McGregor, Namibia saw substantial deterioration in fiscal metrics even well before the pandemic, with some gradual fiscal consolidation leading up to 2020. 

McGregor said given this situation, leading up to 2020, Namibia’s ability to respond to the pandemic and the various measures like lockdowns was significantly constrained. 

“The overall fiscal support measures introduced here, although introduced relatively quickly, were not of the same magnitude as those seen in many other economies, particularly the developed markets – and so there is not much in terms of currently needing to unwind fiscal support,” he said.

McGregor is, however, gravely concerned about Namibia’s revenue outlook, particularly with the forecasted decreases in SACU revenue, typically the single largest source of government revenue.

“This means that government will need to actively reduce its expenditure in the coming years to reduce the budget deficit and slow down the pace of debt accumulation while balancing the large proportion of debt maturing over the next five years,” noted McGregor. 
Most, if not all, economies have indeed seen a substantial deterioration in their fiscal metrics, and so Namibia is no exception in this regard. 
He said the difference is that Namibia entered the pandemic in a concerning position, with very little scope for stimulus – and with the deterioration in economic activity, there is now a more urgent need to correct the fiscal pathway and rapidly introduce broad-based growth reforms.

Also, Rowland Brown, a local economist, said Namibia entered the Covid-19 pandemic already battered and bruised after a challenging few years. 
Brown said, in 2019, Namibia has the fourth lowest growth level in sub-Saharan Africa out of 45 countries. 
For post-Covid-19 recovery, Brown outlined that Namibia needs to address pre-Covid-19 macroeconomic issues as well as pandemic related issues.

2021-01-28  Maihapa Ndjavera

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