ALEX SHIMUAFENI
The domestic economy has posted yet again more worrisome subdued growth figures, recording a contraction of 2.6 per cent compared to a growth of 0.6 per cent recorded in the corresponding period of 2018.
This comes right in the wake of a Bank of Namibia prediction that the economy will contract deeper for the remainder of 2019, by 1.7%.
According to latest information by the Namibia Statistics Agency, (NSA) year on year real GDP for the second quarter of 2019 stood at N$ 25,515 million (or N$ 25.515 billion) compared to N$ 26,185 million (or N$ 26.185 billion), showing the sum of real value-added for sectors shrunk by N$ 670 million.
According to the NSA, the deterioration in the economy is observed across major sectors with more than half of the sectors posting declines in real value-added.
It’s getting more depressing- SSS
“With reference to our 4Q2019 report, the future of the Namibian economy remains bleak, with GDP only expected to pick up in 2020, weak domestic revenue and rising youth unemployment. Escalating debt levels remain a concern, especially in a low growth environment,” said experts at Simonis Storm Securities.
The experts said furthermore, the government will face the challenge to accomplish promises made in Harambee and NDP5, especially those which pertain to high economic growth, low unemployment and a booming manufacturing industry.
Hopes for any economic recovery continues to be shattered as the economy ambles deeper into the depression.
“We expect GDP to contract to 1.1% in 2019, however, with reference to the 1st half of the year, the outlook is moving towards our worst-case scenario of -2.0% for 2019,” said SSS experts.
A look at the key drivers of the contraction
The NSA highlighted that the key drivers for the contraction is attributed to ‘Mining and quarrying’ (-20.2 per cent), ‘Agriculture and forestry’ (-28.1 per cent), Construction (-5.5 per cent), ‘Wholesale and retail trade’ (-2.0 per cent), and ‘Hotels and restaurants’ (-2.8 per cent) sectors, respectively.
Furthermore, moderate declines were recorded in ‘Public administration and defence’, ‘Transport and communications’, Education and ‘Health’ sectors that registered declines of 2.7 per cent, 0.9 per cent, 0.9 per cent and 2.6 per cent, respectively.
However, other sectors posted positive performance during the quarter under review.
‘Manufacturing’ and ‘Electricity & water’ sectors recorded improved performance, posting growths in real value added to 18.8 per cent and 2.7 per cent in the second quarter of 2019.
Improved performance is also observed in the financial intermediation and fishery sector, which posted growths in real value added of 1.9 per cent and 0.6 per cent.
During the period under review, macroeconomic aggregates such as inflation surged up, recording a 4.2 percentage compared to 3.8 per cent recorded in 2018.
This represents an increase of 0.4 percentage points, and is largely due to increases in ‘food and non-alcoholic beverages’ as well as ‘alcoholic beverages and tobacco’.
During the quarter under review, imports rose faster recording N$ 19,687 million whereas exports decelerated to N$ 13,288 million, widening the trade balance by N$ 6,399 million.
This is largely due to the increase in the importation of fuel and a reduction in the export of diamonds.
Revisions are part of good quarterly national accounts compilation best practices because they provide users with more accurate data.
The Q1 of 2019 GDP has been revised further downwards by 0.9 percentage points from -2.0 per cent released in June 2019 to -2.9 per cent.
This revision is mainly due to updated data received from data sources.
Despite an accommodative monetary policy that has kept the repo rate low at 6.75 basis point, the inflation rate of 4.2 per cent remains within the targeted inflation band of 3 per cent to 6 per cent. The significant reduction in economic activities is attributed to continued austerity measures by the government, weak domestic demand for goods and services, reduced disposable income coupled with drought condition affecting most households.
The slowdown in the domestic economy has also been felt in vehicle sales.
Vehicle sales fell to a new low of 808 units since 666 units recorded in January 2019.
On an annual basis, vehicle sales declined by 24.5% and by 10.6% on a monthly basis.
The downward trend persists due to lack of consumer spending, low borrowing appetite, depressed business conditions and a sluggish economic environment.
Some factors hindering the growth in new vehicle sales industry are:
Weak consumer demand; low borrowing appetite for instalment credit; High unemployment; increasing interest in second-hand vehicles; and deteriorating economic environment
Extra-heavy vehicles declined the most (55.6% y-o-y) to 24 units in August 2019, followed by a 52.9% y-o-y drop in heavy commercial vehicles to 8 units. Furthermore, light commercial and passenger vehicles also declined on an annual basis by 29.4% and 15.3% to 389 and 360 units, respectively in August 2019.
On a monthly basis, all vehicle segments recorded a decline.
“We are of the view that the new vehicle sales industry will need a catalyst to uphold any upward cycle,” said Indileni Nanghonga, an analyst at Simonis Storm.
