Construction boosts growth as mining performance declines
The mining industry which contributes to 10% of the economy has suffered a decline in profits due to the depressed production and processing of minerals, as growth in increased activities in construction as well as wholesale and retail trade are recorded
This was revealed by the Bank of Namibia’ (BoN) Governor, Iipumbu Shiimi who added in an interview with The Villager that the weakening performance of the mining sector can be attributed to Uranium and Copper mining that are currently having difficulties in producing output.
Shiimi said many mines had terrible experiences such as a limited capacity to produce, not forgetting the many fires mines are experiencing.
When asked about how far the country has gone in terms of diversifying, Shiimi said the country has fared well but added that there is always room to diversify extensively.
“The manufacturing sector is doing well and value is being added but we need to manufacture more goods. There is also potential in the service sector as we can increase potential in that sector,” Shiimi said.
He also added that the tourism sector can yield more fruits similarly to the transport sector that needs to be explored in-depth.
“We also see potential in the agriculture sector although it is one of the best performing sectors currently, I think we can explore it more and benefit from it,” Shiimi noted.
Shiimi also said the key indicators of the domestic economy showed positive performance during the first four months of 2015 while inflation decreased during the same period.
“Thanks to low international oil prices, annual inflation declined to 2.9% in April from 3.4% in March. The low inflation was reflected in the categories of transport, housing, water, electricity, gas and other fuels, as well as food and non-alcoholic beverages. Going forward, the overall annual inflation is expected to remain low and stable for the remainder of 2015,” Shiimi said.
Meanwhile, the domestic credit demand continues to be strong while annual growth in Private Sector Credit Extension (PSCE) increased by 16.7% on average over the first four months of 2015, from 16.2% during the last four months of 2014.
“When compared to the corresponding first four months of 2014, the growth in the PSCE was 1.6% points higher. The Monetary Policy Committee (MPC) noted that the overall credit extended to individuals remained, especially instalment credit,” Shiimi said.
In addition, the level of reserves stood at N$12.1 billion as of June 2015, of which Shiimi said the stock of international reserves remains sufficient to maintain the one-to-one link of the Namibia Dollar to the Rand.
“The MPC is however still concerned about the high import bill the importation of unproductive goods such as luxury vehicles, which puts additional pressure on international reserves,” Shiimi said.
In addition, BoN announced that the repo rate (the interest rate at which banks are charged for the loans they take from BoN) increased by 25 basis points to 6.5% to maintain the high growth in household credit with special focus on the instalment credit.
Most of the loans are largely used to finance unproductive imported luxury goods and thus in the process puts pressure on the international reserves of the countries.
BoN’s intention with the increase of the repo rate was to encourage saving as the different deposit-taking institutions (the banks) are expected to increase their deposit rates by the same margin.
Meanwhile, the monetary policy stances in advanced economies and most emerging economies continued to support growth.
However, major emerging market economies either reduced or maintained their policy rates at the same level except Brazil, which increased its standard rate to contain the inflationary pressure.