and Edgar Brandt
WINDHOEK – As the Namibian economy struggles to crawl its way out of a prolonged recession, the Minister of Finance Calle Schlettwein, this week cautioned that the pace and scale of the economic recovery is predicated on the timeliness of pro-growth measures announced in the budget. The Bank of Namibia (BoN) this week revised the domestic economy’s growth projection to a mere 0.3 percent for 2019, which represents a downward revision from 1.5 percent predicted at the end of 2018.
“The pace of domestic economic recovery is also impacted by regional and global developments, given that economic, financial and trade are interconnected. It is these dynamics that dictate the medium-term economic projections of any economy. In fact, our projections are close to those of other institutions such as Bank of Namibia and the International Monetary Fund (IMF),” said Schlettwein in Parliament on Tuesday this week when responding to questions on the national budget he tabled at the end of March.
The finance minister further noted that the latest budget seeks to strengthen macroeconomic stability, regain economic growth with jobs and fiscal sustainability. He also pointed out that interventions to support broad-based economic growth and youth employment and self-employment are of priority considerations in this budget.
Schlettwein continued that in the first five months of 2019, global economic growth was reduced to 3.3 percent by the IMF from 3.7 percent projected in October 2018. In addition, economic growth outlook for Namibia’s largest neighbouring trading partners of South Africa and Angola remain tight. “The downside risks to growth, particularly those arising from the Sino-US trade spat, have emerged much faster in speed and impact on growth and is adversely affecting financial market sentiments. At the same time, the adverse effects of climate change have affected a number of economies including Namibia. These are prevailing factors which we must contend with, without loss of generality,” Schlettwein warned.
Meanwhile, according to BoN, the marginal growth prospects of the Namibian economy during 2019 is expected to be supported mainly by improvements in the construction and hotels and restaurants sectors. According to the latest Economic Update from the Bank of Namibia, the domestic economy is projected to recover to positive growth in 2019, before improving further in 2020.
“Namibia’s real GDP growth is projected to recover slightly to 0.3 percent in 2019, before improving to 1.9 percent in 2020. The expected recovery during 2019 will be supported mainly by anticipated improvements in the construction and hotels and restaurants sectors. Furthermore, a smaller contraction for wholesale and retail trade represents a reduced drag on overall growth when compared to the last two years,” said Dr Emma Haiyambo, BoN’s Director of Strategic Communication and Financial Sector Development.
Earlier this week, during a breakfast presentation by investment managers, Stanlib, local economist, Roland Brown, had already said he expects a mere 1.2 percent growth in the domestic economy. This was even before BoN revised the country’s 2019 growth down from 1.5 percent.
“During 2010 and 2015, the domestic economy was good and offered high employment and from 2015 the economy slowed down significantly. Since then then economy has not expanded and the result is high unemployment combine with high household debt,” Brown told the breakfast gathering.
Brown also expressed concern regarding the ballooning public service wage bill. “We are in a difficult situation in terms of personnel expenditure. We are spending more than we are collecting,” Brown commented on government’s revenue and expenditure projections for the 2019/2020 financial year. He was particularly worried about government debt. “Compared to 2010 to 2011 we had about N$16 billion debt and in 2020 we are likely to have N$100 billion debt,” Brown stated.