Namibia’s international reserves have dropped by N$4 billion to N$22.1 billion from N$26 billion on a monthly basis recently bringing the level of reserves equivalent to 6.2 times the currency in circulation, the Bank of Namibia announced last week.
The central bank, however, maintains that the reserves are sufficient and does not warrant delinking from the troubled South African Rand to which the Namibian currency is linked on a one-on-one basis.
Meanwhile, the domestic demand as reflected in the annual growth in Private Sector Credit Extension (PSCE), slowed over the first four months of 2016 compared to the corresponding months in 2015, which can be attributed to lower credit extended to the corporate sector.
“During the first four months of 2016 the average annual in PSCE stood at 12.9%, which is lower than the 15.9% registered over the same period in 2015. Overall, the growth in credit extended to households stabilised at 12.4%. Notably, over the comparable period, growth in instalment credit, which was previously highlighted as a concern, declined significantly from 20.1%,” Governor of the BoN, Iipumbu Shiimi said.
However, the domestic economy performed satisfactory during the first four months of 2016, with the performance mainly being attributed to the growth in retail trade, government construction works and the manufacturing sector, as the activities in the mining sector slowed. The mining sector, which is the sector contributing largely to the country’s gross domestic product (GDP) has seen a decline in the production of diamonds and zinc.
“Namibia’s most key emerging markets continued to perform poorly. Economic activities in Brazil, Russia and South Africa contracted during the first quarter of 2016, while economic growth of China slowed. India on the other hand continued to record high growth of 7.9% during the period under review. Going forward, the global economy is expected to expand, although risks remain and include the potential exit of the UK from the European Union, sustained low commodity prices and further slowdown in emerging market economies,” Shiimi said.
Sharing the sentiments of BoN on the slowdown of the mining sector, Simonis Storms Securities (SSS) said that despite a tough environment in 2015 owing to low global demand for commodities, the mining sector contracted only by 0.1% compared to -6.2% in 2014. Other sectors in mining has seen increase in production, mainly in gold and copper production. Metal ores also contributed greatly to growth in this sector. B2Gold recorded an annual consolidated gold production of 493,265 ounces in 2015.
“We foresee this sector to grow even further by end of 2016 for the following reasons; uranium production is expected to be three times higher than the volume produced during 2015 due to Husab Mine that came on stream, and the production of gold is similarly expected to be more than three times the 2014 production levels by the end of 2016. Looking ahead, we paint a very bleak picture on the economic outlook for 2016, due to the drought situation and possible increases in the cost of water and electricity. That said, we continue to expect GDP for 2016 to decelerate further to 4.8%.,” the financial security firm said.
Meanwhile the Repo Rate remained at steady at 7% to sustain the country’s economic growth, particularly in light of the slow and fragile recovery in the economies of Namibia’s trading partners. Economic growth in the advanced economies remained almost unchanged during the first quarter of 2016, with the exception of Japan, which improved. GDP growth in the United States and European area remained steady from the previous quarter at 2.0% and 1.7% respectively, while the United Kingdom moderated slightly to 2.0%.
Going forward, growth is expected to continue positive, but risks remain and include the slowdown in the economies of the country’s trading partners, soft commodity prices, volatile exchange rate and the effects of the prevailing drought conditions. Meanwhile, statistics released by the Namibia Statistics Agency show that the annual inflation for May 2016 stood at 6.7 percent as compared to 3.0 percent recorded in May 2015, an increase of 3.7 percentage points.