FNB Namibia and RMB Namibia recently co-hosted economic presentations with the theme titled “Global challenges meet wider imbalances”.
The presentations were given by Dr Theuns de Wet of RMB Global Markets and Daniel Motinga of FNB Namibia.
Theuns highlights that global growth is weakening and holds significant risk for both the SA and Namibian economy.
This year, he however spend a great deal of his presentation on unraveling some of the imbalances prevalent in the South African economy and how the current global environment supports the consolidation of these imbalances.
“A key imbalance is that South Africa runs a 6.5% of GDP current account balance which requires that it needs about N$200 billion foreign capital inflow to sustain growth and domestic consumption,” he says.
He further argued that given the weak global risk return environment funds will continue to flow to South Africa in terms of the RMB Global markets core view. He, however, points out that there is a real risk that a slight weakness in these flows could induce greater risk in terms of drastic weakening in the exchange rate relative to key crosses.
Motinga, who is the Senior Manager Research and Development at FNB Namibia amplified these risks and argued that whereas Namibia is experiencing relatively positive growth, anemic growth prospects in key trading partner economies pose a risk to the sustainability of the medium term domestic growth prospects. Motinga attached a higher probability to disturbances in the flow of funds to the South African environment which could see the Namibian dollar weakening further with attendant inflationary risk.
However, Theuns hinted that he attaches a higher probability to the continuation of these flows, which implies a relative strengthening of the exchange rate of the South African Rand and the Namibian Dollar.
“The core view on Namibia is that growth will be positively impacted by private sector and foreign direct investment led investment spend beyond 2015. High frequency indicators such as monthly vehicles sales suggest that the consumer is starting to put the brakes on spending especially over 2014. The fiscal policy over the last few years government spending is projected to be slow and only by around 7% in 2015 as opposed to 18% this fiscal year, ” according to Motinga.
The two economists agree that Namibia and South Africa will have positive growth for this year and 2014.