Sectors dependent on travel and government spending are expected to remain below their pre-Covid-19 levels for much longer than expected. The affected sectors include hotels and restaurants, transport, construction, public administration, defence and education.
This sentiment was shared by the director for research and financial sector development at the Bank of Namibia, Emma Haiyambo, this week during a seminar earmarked to map the country’s post-Covid-19 economic recovery.
“Gross domestic product growth is expected to be around 3% in 2022 and around 4% in 2023, an improvement from about 1% in 2021. Growth will be supported by the mining industry during 2022 and 2023, especially diamond mining. All other sectors are also expected to return to positive growth, mainly due to low base effects from 2020,” she added.
The domestic economy experienced job losses and a significant decline in employment quality during 2020 and 2021. These issues contributed to an overall weak outlook.
Haiyambo said retrenchments were estimated at 12 238 in 2020, and at 14 563 during the first three quarters of 2021. The major risk to an economic outlook remains Covid-19 and its related variants.
“Strategies need to be devised to both ensure a rebound from the pandemic, as well as to sustain the growth projections. We have looked at what other countries have done in this regard, and to see if there are lessons for us,” Haiyambo stated.
In outlining the lessons learned, she said it is recommended that Namibia devises measures to diversify the economy, and to adopt public-private partnership arrangements to help revive growth. Many economic recovery strategies in other countries are government-led, which is not feasible in Namibia, given the fiscal consolidation drive.
In this regard, Haiyambo believes government may drive policy, but recovery-related activities should be led by the private sector.
Covid-19 had a severe strain on government revenue sources. So, to address the fiscal space issue, the Namibia Revenue Agency has been encouraged to fast- track increasing efficiency in revenue collection and enhancing compliance.
“The post-Covid-19 strategy is to accord strategy to high- priority areas on enhanced resource mobilisation from both traditional and alternative sources,” Haiyambo emphasised.
At the same occasion, Professor Ricardo Hausmann, director of Harvard Growth Lab, said Namibia requires an internally consistent policy response to simultaneously address its three most pressing challenges. These challenges are inclusion, growth and fiscal policy.
Harvard Growth Lab at the Centre for International Development is currently working to understand the dynamics of economic growth in Namibia to translate those insights into more effective policymaking in developing countries.
“The future will require fiscal consolidation, so fiscal impulse is not going to be accelerating growth. Growth needs to come from the recovery of existing capacity and tradeable activities. These activities have a large multiplier effect on the rest of the economy. Most importantly, it is through the diversification into newer areas such as green energy, manufacturing, logistics and services,” Hausmann stated.
According to local economist Rowland Brown, Covid-19 added fuel to a smouldering fire as the economy before the pandemic was already struggling. He said people in the country were already getting poorer before the pandemic.
Brown noted that the biggest current challenge for government is deficit funding. “There is a big question mark this year about where the money to fund the deficit is coming from, and that can return us to the difficult years such as 2016, where liquidity dried up in the economy,” he observed. Furthermore, households now have a larger portion in the GDP formula. Said Brown: “If we want households to become an increasing contributor to GDP, we need them to improve, and for them to improve, we need more employment. That is the primary method”.