Maihapa Ndjavera
WINDHOEK – While the Namibian economy, which is still reeling from the effects of a prolonged recession, is expected to eventually return to growth sometime during the course of 2019, a local economist has cautioned that any rebound into positive territory will still be low growth of less than one percent. In fact, the growth expectation is for a mere 0.8 percent, according to Robert McGregor an economist at Cirrus Capital (Pty) Ltd.
Responding to questions from this reporter, McGregor said looking ahead at 2019, much of the expected growth is the result of a base effect with not much organic growth. He feels the mining industry will continue to play an important role in the economy, particularly if ramp ups are seen in gold and uranium production. “The industry as a whole is susceptible to global commodity prices and a relatively weaker rand favours our miners. 2019 is expected to a somewhat volatile year for commodity prices, given tensions around the trade war between the US and China, and slower growth anticipated for the Chinese economy (meaning the nation’s demand for commodities will slow as well)”, McGregor explained.
He continued that after some quarterly contractions for the construction industry in 2018, contractions in this sector should bottom out and thus a return to growth should be forthcoming. Despite not having much room for increasing expenditure, he expects government to be tempted to spend more given it is an election year, and thus provide a short-term but unsustainable injection for the economy which could actually cause greater problems in the long run.
He further said that to put this in perspective, unemployment in Namibia will only really decrease when the country experiences growth of about five percent and higher. Thus, while the return to growth in 2019 will put an end to the contraction or depression, this will not be the sort of growth the country needs to truly make a difference for most Namibians.
“Just because a return to growth is forecast for 2019 does not mean that it will be an easy year, as a number of other sectors will struggle to see growth in this stagnating economy. Prospects of another drought year, or at least below average rainfall, will put pressure on the agriculture sector, the largest employer by sector and result in another tough year for vulnerable households reliant on subsistence farming,” said McGregor.
He noted that while there is no ‘quick fix’ to correct the economy, rebuilding investor trust by creating a welcoming, secure investment would not only drive growth but would also see job creation and higher government revenue through taxes. “While we hope that the worst is behind us, potential growth in the coming years will hinge on government making the right moves for growth and job creation,” McGregor concluded.
With the domestic economy contracting for two consecutive years, 2019 will start from a low base, agreed Klaus Schade, Research Associate at the Economic Association of Namibia. Schade noted that the manufacturing sector, construction sector and the public sector will be the drivers for the 2019 economic growth. “Government is filling vacant positions in particular in the education and health sectors that should result in positive growth rates and should also benefit the wholesale and retail trade sector. The output of the agricultural sector depends to a large extend on the rainfall, the timing and quantity and the forecast is not very positive,” said Schade in forecast for 2019.
He stated that the diamond sector is expected to face challenges this year due to declining demand in its main markets of China and USA that will most likely not be outweighed by growth in the uranium mining and other mining sectors. However, he cautioned that despite positive economic growth in 2019, per capita income is expected to decline further, since economic growth will not exceed population growth.