A glimmer of hope for ailing economy- Capricorn

Although the local economy has registered worrisome performance in the very first quarter (0.1% contraction), Capricorn Assert Management has expressed that there is a silver lining to the dark cloud.

The finance ministry had earlier on put it on record that 2018 will see the recessionary storm weathering down but Capricorn does not see any huge leaps of growth either.

 Capricorn Asset Management Economic Analyst, Claudia Boamah says this is so because some sectors which had recorded high growth rates in 2017 were recovering from extremely low bases in the first place and a similar observation can be made about the recent turnaround in the construction sector.

“Our skepticism concerning the magnitude of growth stems from the escalation in protectionism which would hike import costs and stifle our exports and export related activity. Then there’s a risk right at home – fiscal consolidation – which despite being necessary has the offshoot of adversely impacting several tertiary sectors and even construction in the secondary sector. All in all, the outlook on 2018 is optimistic… cautiously, optimistic,” she adds. 

The absence of drought and ongoing activity in Uranium production are some of the low hanging fruits while the firm expects agriculture and mining to expand moderately.

  She advises that the construction sector, whose contraction had a domino effect on the economy in the last financial year    should be supported by the same factors (like government spending and completing buildings) which brought it out of recession. 

“A significantly improved business sentiment since the last quarter of 2017 as well as low inflation should bolster an expansion in the wholesale and retail trade sector.”

“Given the strong 3.9% global growth projection, it is possible that hotels and restaurants might see an increase in traffic from tourists and as the demand for exports picks up, our ports should see more activity giving the transportation sector a boost,” says Boamah.

Nevertheless, the disappointing first quarter economic growth figures have made PSG Namibia’s forecasts gloomier given the reappearance of inflationary pressures and the emergence of moderating Chinese growth as well as intensifying trade protectionism that will weigh on global growth. 

“Despite the expansion in Q1, we continue to expect that the agricultural sector will be a significant negative contributor to GDP in 2018 due to lower crop yields, the decline in livestock inventories and lower fish catches.”

“As we expected, the construction industry rebounded thanks to relief provided by African Development Bank loans for certain infrastructure projects, which saw an increase in government expenditure on construction of 36.6% y-o-y in Q1,” says the firm.