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BoN warns of a possible commodity price slump

by Tirivangani Masawi


Although the Namibian economy performed reasonably well in the third quarter of the year, the Bank of Namibia (BoN) Deputy Governor Paul Hartman, has warned that possibilities of commodity price slumps are still high in the near.

Harman said the market price slumps are most likely to be brought about by the economic uncertainty in the European trading bloc. Most countries in Europe including Italy, Spain and Greece have been struggling to deal with the expanding debt levels prompting them to cut down on expenditure including importation.

The BoN also noted that the manufacturing sector has slowed down its weakly performance because of slow production of soft drinks, beer and blister copper in the last quarter of this year.

“Within the primary industry, the agricultural sector performed relatively well, while the mining and quarrying sector posted slowdowns, with the exception of zinc and uranium output. The secondary industry was also characterised by weakened performance in the manufacturing sector as a result of the reduced production of beer, soft drinks and blister copper. 

“On the other hand, activities in the construction sector gained some momentum as reflected in the growth of the value of buildings completed. Meanwhile, the wholesale and retail trade and tourism sectors within the tertiary industry also showed some improvements in comparison to the preceding quarter,” said Hartman. 

Europe is among the major consumers of Namibian commodities from the extractive industry including uranium, zinc, and also the horticultural and agricultural products.

A recent economic quarterly bulletin released by the Deputy Governor of the BoN notes that the Namibian international investment position firmed by 4.6% points despite the country going on the international market to borrow.

Hartman noted that, “Namibia’s International Investment Position (IIP) recorded a surplus position of N$22.9b at the end of the second quarter of 2011, an increase of 4.6% from the stock at the end of the preceding quarter. In the previous four quarters, portfolio investment abroad continued to be the major investment for residents and contributed to the surplus position at the end of the quarter while foreign direct investment in Namibia remained the driver behind the country’s liability position.”

The central bank also noted that the country’s debt remained prudent despite the growing budget deficit brought about by the increased expenditure by Government in the Targeted Intervention Programme for Employment and Economic Growth.

“Fiscal developments as measured by total Central Government debt and guarantees remained prudent and well within the target bands of 25.0% and 10.0% of GDP, respectively.The Central Government debt stock increased by 14.1% quarter-on-quarter to N$15.8b (16.0% of GDP) at the end of the first fiscal quarter of 2011/12. Over the same period, the total Central Government loan guarantees issued to both the public and private sectors fell on a quarterly basis to N$2.0b, an equivalent of 2.0% of GDP,” noted Hartman. 

FNB Chief Economist Daniel Motinga attributed the revenue growth to possible investor interest in the country.

“Most of the growth noted could be because of trade increase but in most cases, it is just an indication of how much money comes and leaves the country,” said Motinga.