WINDHOEK – Chief Economist at Capricorn Asset Management Floris Bergh said the South African economy took a hit in the first quarter, declining by 3.2 percent. Similarly, Namibian GDP contracted by two percent. “This means that Namibia is likely to hardly see any growth this year,” quantified Bergh, stating that the weakness in the economy is becoming more widespread.
He highlighted that the weakening economic growth and downwardly pegged inflation provides room for monetary policymakers to consider their policy stances.
He further detailed that the United States of America economy is currently in a strong position with low inflation and full employment. “Confidence measures are declining amidst the trade war and geopolitical tensions,” he added. Bergh mentioned that the Chinese economy is cooling and its demand for goods and services from the rest of the world is declining sharply.
Bergh also said this is evident from, amongst others: severe shrinkage in the sales of vehicles, slow credit growth and a hard-hit construction sector in conjunction with a sharp slowdown in the property market. “The mining sector has now also contracted in the first quarter, following a two-year period of strong growth,” he said.
The South African Reserve Bank (Sarb) has explicitly put a cut on the forecast horizon, initially by the first quarter of 2020. “However, it is now believed that they will cut rates at the July meeting and the Bank of Namibia will cut in its August meeting,” stated Bergh.
Bergh revealed the monetary policy will again be expected to provide relief and stimulus to economies in an environment where fiscal policy can do very little. “Ideally, one would like to see governments loosen the purse strings, borrow more, cut taxes or spend more. However, Namibia cannot afford to, because it is at the limits of fiscal ratios, while revenue is being severely constrained by economic weakness,” concluded Bergh.
2019-07-05 09:57:00 2 months ago