The local economy which suffered the biggest decline last year since 1993 continues to sail through a stormy weather as drought conditions and outside economic forces remain a major risk to growth, PSG Namibia has cautioned.
“Due to poor rainfall since November, western Namibia is experiencing a severe drought, despite recent downpours, which bodes ill for the agricultural sector,” warns the firm’s analyst, Eloise du Plessis.
Farmers continue to struggle with effects of drought which have reduced the number of their heads and speaking to The Villager recently, former Namibia Agricultural Union (NAU) executive manager now full time farmer, Sakkie Coetzee, said if the country does not receive above average rainfall it would be disaster.
Presently, a number of previously disadvantaged farmers are battling Agribank which has started blacklisting those that have defaulted on loans.
Looking at the production-side data, the main drivers of the economic slump last year were lower output in the construction (-26%) and wholesale & retail sales (-7%) sectors, says PSG.
The final chapter (fourth quarter) of the economy last year ended in a sorry state, on an annual basis the economy fell down by 1.0% for the second consecutive quarter.
PSG notes that the largest negative growth rates were recorded in the manufacturing (-12% year-on-year), fishing (-7.8% year-on-year), health (-6.3% year-on-year) and construction (-4.1% year-on-year) sectors.
Namibia will take some serious blows from the trade war between China and the US.
Warns PSG, “There are also concerns that a trade war between the US and China could reduce global trade and hurt commodity prices, which would adversely affect Namibia’s mining and manufacturing exports.”
This however does not mean to say that all is gloom and doom for 2018 as the economy is expected to pick itself up from the dust.
“Thanks to an expected uptick in mining production, improved consumer spending and a slower decline in construction output. A loan from the African Development Bank (AfDB) is helping the government to plug holes in its budget and to fund infrastructure projects that will offer relief to the ailing construction sector,” says PSG.
Diamond production is said to have recovered following the in-port maintenance of the Mafuta diamond mining sea vessel in 2016 and the coming in of the famous SS Nujoma exploration vessel last year.
Husab mine, the world’s fifth largest Uranium mine is also expected to increase production this year and to reach full-capacity production of 6,500 metric tonnes per year in 2019.
Says Eloise, “Lower inflation and an accommodative monetary policy stance are also expected to drive a modest recovery in consumer spending.”
“Finally, the positive political developments in South Africa could support the Namibian currency’s strength and lead to a slight improvement in trade with South Africa.”
“We believe that quarterly GDP growth bottomed out in Q2 2017 and that the economy should expand again in 2018, but growth risks are tilted towards the downside,” she said.