WINDHOEK – It is merely weeks before the banging of drums for the new year 2015 and economists are predicting lower prices for household items in the first months of 2015. This is largely because prices for many items declined significantly in October, compared to June prices, in some cases decreasing by nearly 50 percent, except for the meat price that has been going up because of the low number of cattle marketed.
Overall, hopes are high that Namibia may just pull off the 6 percent economic growth target for 2015, set in the Fourth National Development Plan (NDP4), largely because of a boom in the construction sector and the various new mines expected to come on-stream.
There is cautionary note, though, on the sustainability of growth and the effects of implementing policy interventions.
Already 2014 was a year of mixed results, with closure of mines and loss of jobs – the closure of Okorusu mine alone left nearly 400 people without jobs – a decline in mining output, and low prices for uranium and copper.
The agricultural sector also registered a somewhat weak performance, but the Institute of Public Policy Research (IPPR) Associate Klaus Schade expects “strong growth in the agricultural sector rather than a decline”. Overall thus far Namibia’s economy grew by 5 percent in 2013 and by 4.2 in the first quarter of 2014 while the second quarter of the year registered 3.0 percent.
“To achieve the envisaged 6 percent annual growth rate over the NDP4 period among others the prioritisation of government interventions needs to be strengthened in line with NDP4 priorities as well as policy coherence and coordination. Moreover, high economic growth needs to be economically, socially and environmentally sustainable, which requires tools to analyse the socio-economic and environmental impacts of various policy interventions,” Schade says in the latest IPPR Economy Watch.
The elevated growth prospects for 2015 are pinned on the coming on stream of Husab uranium mine, the Otjikoto gold mine, and the Tschudi mine. Also the hopes are anchored on the construction sector which has continued to register growth this year, according to approved building plans, and compounded by the expansion of the Walvis Bay harbour and the SADC gateway harbour north of Walvis Bay, construction of which is set to commence next year.
On the inflation front, Schade is of the opinion that the new year would start off with low inflation rates, because of the expected low annual inflation rate for 2014, at 5.5 percent. Throughout this year the annual price increases have been on the decline, with only meat prices increasing because of the lower number of marketed cattle. Bread and cereal prices went down from 12.3 percent in June to 6.4 percent in October, while prices for items such as fuel decreased from 11.3 percent to 3.3 percent between June and October. The crop and oil price trends are reflected in the inflation rate that increased over the first half of the year to 6.1 percent before descending to 5.0 percent in October.
Schade also expects a more gradual strengthening of monetary policy from the Bank of Namibia, contrary to South Africa where monetary policy could rather be eased in order to stimulate economic growth.
“While foreign exchange reserves dropped to below the international benchmark of three-month import cover, the reserves covered the currency in circulation more than five times, which is a comfortable position for maintaining the currency peg. In addition, Namibia’s net international investment position remains strong and mitigates the low import cover ratio. However, high consumption expenditures on imports require early and gradual monetary policy interventions in order to avoid steep interest rate increases that could result in households defaulting on their loans,” he said.
By Desie Heita