Economy stable despite external threats

The Namibian economy showed stable growth in the first half of the year to-date, Bank of Namibia (BoN) has acknowledged in its latest quarterly bulletin released late last week.
BoN Deputy Governor, Ebson Uanguta said domestic economic performances stayed well on course to achieve the set 4% mark, despite different performances from the global economy since January.
Uanguta said: “Notwithstanding the weak global economic growth, available indicators for the real sector in the domestic economy showed favourable performance across all industries during the first quarter of 2013, compared to the corresponding quarter of the previous year.
“In the primary industry, mineral production and cattle marketed in the agricultural sector boosted growth.”
He also said that the increased cattle marketed, however, resulted from the prevailing drought in the country that forced farmers to market many of their livestock.
“The construction sector as reflected by the rise in real value of buildings completed led the growth in the secondary industry.
“The tertiary industry also posted positive results due to increased activities in the wholesale and retail trade and transport sectors while the tourism sector weakened mostly due to the recession in the Euro Area,” he said.
According to Uanguta, growth in broad money supply continued to be sluggish at the end of the first quarter of 2013 amidst a low inflation environment.
“The sluggish growth can be explained by the reduction in domestic claims of the depository corporations as businesses reduced their borrowings,” he further said.
According to Uanguta, Namibia’s headline inflation slowed by 0.6% reaching an average of 6.4% during the first quarter of 2013 compared to both the previous quarter and the first quarter of 2012.
BoN attributed the reduction in borrowing by business to slower inflation rates for food, transport and alcoholic beverages.
However, although BoN acknowledges growth of the economy they also raised concern with central government domestic debt which increased both on a quarterly and annual basis at the end of the fourth quarter of 2012/13 as mirrored in the increased domestic and external debt stock.
“Similarly, Government loan guarantees rose over the same period mostly due to guarantees issued to the transport sector.
“Namibia’s external balance recorded a surplus in line with a slight increase in the stock of international reserves during the first quarter of 2013.
“This surplus was, however, lower relative to the preceding quarter due to the continuous current account deficit and the reduced net capital inflows in the capital and financial account over the same period,” Uanguta added.
The BoN quarterly bulletin also showed that the stock of international reserves was, however, sufficient to sustain the currency peg and represented 14.3 weeks of import cover.
Furthermore, Namibia’s external competitiveness improved on an annual basis during the first quarter of this year.
“The earlier depreciation of the rand means Namibian products were cheaper on the international market. On a quarterly basis, however, the later appreciated thereby denting Namibia’s competitiveness over the same period. “Moreover, the rising unit labour cost in the manufacturing sector might dent the country’s external competitiveness,” he explained.
According to BoN, going forward, the global growth is expected to remain weak and could negatively affect Namibia’s growth prospects.
“The IMF lowered its economic growth forecast for 2013 to 3.3% from the January forecast of 3.5%. The sluggish global economic growth might negatively affect Namibia’s economic output due to depressed demand for exported commodities, despite the depreciation of the local currency,” BoN said.