THE Namibian economy will probably show marginally positive growth this year of 1.5% in real terms. This outcome will largely be the result of a “flattening” out of the down cycle rather than a real recovery.
This is according to chief Economist, Floris Bergh at Capricorn asset management. Bergh stated that the down-cycle has been evident since 2016 and carried over throughout 2017 and 2018.
“In fact, we expect that the economy as a whole contracted in 2018 in real terms,” Bergh said.
Amongst the primary sectors, 2018 was a mixed year with Agriculture and Fishing struggling, while Mining experienced a bounce. For Mining, it was only the second positive year over the past five.
Bergh predicted a somewhat positive growth from these three sectors in 2019. Similarly, amongst the secondary sectors, 2018 was mixed, with manufacturing contacting by an estimated 5%, whereas Electricity & Water and Construction are expected to have done reasonably well.
“Bear in mind that Construction contracted by more than 25% in each of the preceding two years – a sharp, severe recession in the sector. Looking forward, there should be somewhat of a recovery from a low base in these sectors,” he said.
Bergh further stated that the tertiary sector, encompassing mostly services, is where, amongst others, the role of Government is taken into account.
“The fiscus has been under tremendous pressure which, of necessity, stifled growth in Government spending and, hence, economic growth,” Bergh said, adding that Retail & Wholesale trade has contracted by an estimated 4.9% in 2018. Some other industries like Transport, Post & Telecoms, Financial, Real Estate and Business services were positive, but Hotels & Restaurants were negative, according to the official National Accounts.
“Ideally, in a situation like this, a country could use fiscal policy to stimulate the economy. Increasing spending on, say, infrastructure or wages gives final demand in the economy a boost and hence lifts the growth rate. However, Namibia does not have any fiscal maneuverability – debt levels, spending levels and deficits are already too high and threatens the country’s credit worthiness,” he concluded.