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Global Economic Outlook Has Darkened – Agribank

By: Hertha Ekandjo

Agribank of Namibia says that the global economic outlook had darkened significantly, and the situation could deteriorate further.

A report by Agribank’s research and product development desk noted that inflation, rising interest rates and heightened geopolitical tensions were posting headwinds to global economic growth.

“According to the IMF, global growth is expected to slow to 3.2 per cent this year, from 6.1 per cent in 2021. The slow-paced growth can be ascribed to slowdown in the developed countries, particularly China, United States and European countries,” the research desk said.

According to the bank, renewed Covid-19 outbreaks and lockdowns continued to suppress China’s growth, while the fear of the spreading monkeypox could derail recovery in the developing countries’ health sector.

Moreover, the desk report noted that a hefty impact had been impended on the global food supply chain by the Russian-Ukraine war.

The two countries produced 74 per cent of sunflower oil and 34 per cent of wheat worldwide.

“A sizeable amount of these products has been removed from the global markets. These supply shortages have increased the price of world food items significantly. Higher inflation is a ticking boom in most global economies, causing a rise in interest rates, and Namibia is no exception,” said Agribank.

Furthermore, the report mentioned that there are renewed hopes for stable global wheat prices to respond to the supply constrain, as other wheat-producing countries, particularly Egypt, revamp wheat production.

Agribank added that the country’s economy has been vulnerable to shock waves presented by global events such as the pandemics, de-globalisation, commodity price volatility and geopolitical tensions.

“These have been felt through the channels of supply chain disruptions, logistical delays, reduction in commodity prices and the rise in interest rates and inflation. Due to the fragility of the local economy coupled with a pile of already existing challenges, there is a need for the country to diversify its economic activities and promote food and energy security,” the report noted.

The report mentioned that the government was focused on driving diversified and sustained economic growth.

Moreover, the bank reported that strategic actions taken thus far, included remodelling of the green scheme projects, investment promotion, improving market access, infrastructure development and the development of a green hydrogen project.

“The green hydrogen project has been a topical subject in the policy and business dialogues. Although this is a medium to long-term initiative, development of this project comes at a time of rising inflation, plummeting growth and rising repo rate, which are taking a toll on businesses and consumers and threatening food security,” said Agribank.

According to the development desk, the green hydrogen project could be a beacon of hope for energy security, employment creation and local skills development. They also note that the potential to spillover to the agriculture sector related to ammonia production would create an opportunity to develop the agro-industries, such as local fertiliser production, which would reduce reliance on imports for agriculture production inputs.

The bank stated that improvement in the cattle market to uphold sectoral growth signs of recovery from the prolonged drought were starting to emerge, and the beef market recorded a 20 per cent growth in cattle marketed for the first half of 2022.

About 20,000 more cattle were sold by June, adding to the year-to-date total of cattle marketed 121,555 compared to the 101,016 during the same period of 2021.

According to the report, the improvement resulted from a 17 per cent surge in live exports to 67,262 in the half year 2022 compared to 57,262 in the same period in 2021.

“Farmers in the Southern Veterinary Cordon Fence are leaning towards weaner live exports for higher returns. Therefore, the number of cattle marketed to local abattoirs in the S-VCF reduced by 28 per cent to 15,166 cattle in the half year 2022, compared to 18,933 in 2021.

“Progress is noted at abattoirs, north of the Cordon Fence, with a 146 per cent increase to 2,048 cattle marketed in the first half of 2022 compared to 831 in 2021. This is in line with upbeat cattle activities, resulting from the reopening of the Katima Mulilo abattoir and the export of beef to Ghana and Angola,” said Agribank.

Meanwhile, small stock marketing performed relatively well in the first half of this year, recording a 33 per cent increase to 378,008 heads from 284,778 in 2021.

Furthermore, live sheep export continues to be the primary driver of this sector, due to favourable market conditions. Therefore, sheep slaughtering reduced by 15 per cent in the first half of 2022, to 53,821 from 63,505 in the same period in 2021.

“Pork market is set to realise its full potential during the first half of 2022, at least 22,863 were slaughtered by Meatco registered abattoirs, a 4 per cent increase from the 21,921.

Stable growth in the industry can be attributed to Meat board’s initiatives under the Pork Market Share Promotion Scheme, to assist local producers with market access amidst cheap import,” reports the bank.

Agribank reported that the food inflation in Namibia stood at an average of 7 per cent in June 2022, compared to 7.3 per cent in June 2021, which was driven by meat prices decreasing from 2021 to an average inflation rate of 5.6 per cent in the mid-year 2022, compared to the 14.0 per cent in 2021.

“Local meat supply has improved. In 2021 farmers were still restocking and recovering from the prolonged 2019 drought, coupled with covid-19 effects,” the report mentioned.

Hertha Ekandjo

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