Are we headed for a depression?

Analysts at Namibia Equity Brokers have warned that if the negative economic headwinds continue non-stop the prevailing recession could head towards a depression.  

While a recession occurs when an economy registers two-quarters of negative growth, a depression is a prolonged period of an economic recession marked by a significant decline in income and employment.

 The local economy has failed to grow positively for nine straight quarters now and some economic-forecaster are convinced the country ought to brace for a negative rating. 

 Just a month ago, Fitch Ratings (Fitch) announced its decision to affirm Namibia’s long-term foreign currency credit rating at sub-investment grade and kept its outlook at stable.

In November 2017, Fitch had downgraded Namibia's sovereign credit rating from BBB- to BB+ and changed its outlook from negative to stable.

 

The current low economic growth and increased bilateral loans may trigger a negative outlook on the current credit rating, said senior analyst at Cirrus, Dylan van Wyk, who was speaking on behalf of the company’s subsidiary, NEB.

In its report, NEB said the latest contraction of -0.2 paints a grim picture for the remainder of 2018 considering BoN’s expectations for +0.6% growth.

“While many allusions have been made to ‘the storm being over’ or ‘green shoots’ being seen, these have not materialised to offset yet another quarter of economic contraction.”

“While the Q1 GDP tables released earlier this year suggested that this would be the fourth consecutive quarter of economic contraction, historical revisions in the Q2 tables indicate that this is, in fact, the ninth quarter of consecutive contractions,” said NEB.

Given the poor activity recorded in the Agriculture sector, which is considered the highest employer, the impact this will have on jobs is a concern.

PSG Namibia’s Eloise du Plessis said, “We do not expect the agricultural sector to be the economy’s manna from heaven, due to depleted livestock and fish stock numbers and a lower crop harvest compared to last year’s bumper harvest.”

 

Manager at Bank Windhoek’s ESME Branch, Mbo Luvindao has also remarked that the challenges currently being faced by the Namibian economy may cause many to react with uncertainty.