Namibian exporters are set for a tough time because of the ongoing world economic slowdown the Bank of Namibia has said.
BoN believes that the expected slowdown in economic performance in the European Union which is one of the country’s export destinations will decrease market interest for Namibian goods as most people in that region will struggle for buying power.
Namibia exports fish, mining products and agricultural products to the European bloc and the country is also one of the many African countries that has inked the EPA initial agreement to cement the European market for the future.
Namibia is likely to take a harder hit, depending on the performance of its trading partners, although Bank of Namibia says, world growth forecast was marginal which does not make a big difference. “A lower economic growth rate for the world economy is not good for the Namibian economy. This is because it may lead to reduced demand for our exports, especially if Namibia’s trading partners are among the slow growing economies. In this particular instance, the 2014 growth forecast for the Euro area, one of Namibia’s key trading partners, was reduced from 1.1 to 0.8 percent. However, the overall reduction in world growth forecast was marginal and may therefore not make a big difference, “BoN said.
“The World economic growth has been dragged down by the slowing growth in the emerging market economies, coupled with the weak recovery of the Euro Area and the slowing of the Japanese economy” BoN Director: Strategic Communications and Financial Sector Development, Ndangi Katoma told The Villager.
He added that weak activity by oil exporters contributed to the decline of the global economic growth.
Last year, construction was projected to be the leading growth sector for the year 2014, with growth rate estimated at 35.4%.
According to the Economic Outlook for December 2014, the South African economy is expected to perform weaker during the year, with its growth projections having reduced from 1.4% and 2.3% to 1.7% and 2.7% which has a direct effect on the Namibian economy because South Africa accounts for 16.2% of exports and 62.3% imports.
“Poor growth in South Africa would affect the Namibian economy through various channels, including lower demand for Namibia’s exports and potentially depreciating exchange rate. We should, however, note that growth rates in Namibia and in South Africa are not always similar as these may come from different sources” Katoma told The Villager.
Despite the forecast, Bank of Namibia still expects Namibia to record a growth of 5.3% and 5.6%.
Even the mining sector was affected with a 19.5% contraction in Uranium mining because of poor production levels recorded in the first 10 months of the year and also because of low international prices for uranium which resulted in some uranium projects in Namibian being put on hold.
The phasing off of the tax breaks and adjustments in salaries of civil servants implemented in 2013 caused a slow growth in the tertiary industries which were expected to be lower than it was in 2013 at 6.5% in 2014, a reduction from 8.1% in 2013.
“The increase in disposable income resulted in high growth for the wholesale and retail trade of 14.5 percent in 2013 compared to the estimated 8.0 percent in 2014” Katoma said.
Katoma told The Villager that external shocks such as low growth in international markets, sharp falls in international commodity prices (e.g uranium prices) are factors that Namibia has not control over that the mining sector is vulnerable to and will remain a risk on the outlook which makes dependency on mineral export risky because raw commodity prices are more unstable than prices for manufactured goods.