Staff Writer
The domestic economy is expected to continue bleeding as it spends more on imports than raking export revenues.
This comes as Namibia recorded a trade deficit in each month Year-To-Date (YTD), averaging a monthly trade deficit of N$3.4 billion.
Experts at Simonis Storm have predicted that with the first half of 2022 behind us, they expect Namibia’s trade to continue printing negative balances for most of the second half of 2022.
“While mining production has improved in the first two months of 2Q2022, we believe that global inflationary effects coupled with a weaker Rand will inflate the value of imports greater than a weaker Rand boosting our export earnings.”
“Mining production, which constitutes about 70% of total exports on average, has been improving into the 2Q2022. The various mining indices from the NSA grew by 25.1% in 1Q2022 and 35.4% in the first two months of 2Q2022. We believe that rising mining production fetching elevated global commodity prices will be positive for corporate taxes and royalties paid to government in 2022 as a whole, with a weak Rand also benefiting export earnings figures for 3Q2022,” they said.
Simonis Storm’s Crystal Ball
Not only would this contribute negatively towards the 2022 (Gross Domestic Product i.e. economy) GDP calculation that follows the expenditure approach, but this would also contribute to a worsening current account balance.
Indeed, preliminary figures from Bank of Namibia (BoN) show a current account deficit of N$7.3 billion in 1Q2022 compared to a deficit of N$3.4 billion in 1Q2021.
BoN expects foreign currency reserves to decrease by about N$4 billion (foreign reserves at N$42 billion as of June 2022) owing to a rising import bill which is mainly driven higher by fuel product prices and a weaker Rand exchange rate.
This will likely worsen the current account balance till the end of the year.
The value of exports increased by 15.1% year-on-year (y/y) in June 2022 (compared to 42.1% y/y in May 2022), while the value of imports increased by 24.8% y/y (compared to 55.4% y/y in May 2022).
The trade deficit narrowed from N$6.1 billion to N$2.5 billion between June and May 2022.
On a quarterly basis, exports recorded growth of 3.5% y/y in 1Q2022 and -13.8% y/y in 2Q2022 whereas imports recorded growth of 7.3% y/y in 1Q2022 and 16.2% y/y in 2Q2022.
Namibia is a small open economy that is heavily dependent on global trade. In 2021, total trade accounted for 87.5% of GDP and is trending above levels seen in the last two years.
The World Trade Organisation (WTO) now expects merchandise trade volume growth of 3.0% in 2022, down from their previous forecast of 4.7%.
The WTO’s trade model captures the impact of Ukraine war, sanctions on Russia and reduced demand in the rest of the world as business and consumer confidence falls.
This implies that lower external demand could weigh on Namibia’s exports.
Export products sold in June 2022 were mainly from the mining category (47.1%), manufacturing (46.3%) and agriculture and fishing (4.5%) and were mainly destined to Botswana (19.6% of total exports in June 2022), South Africa (18.3%), France (9.0%), China (7.4%) and Spain (6.4%).
On the other hand, imports were mainly from the manufacturing category (64.8%), mining (32.1%) and agriculture and fishing (2.9%) and were mainly bought from South Africa (35.3% of total imports in June 2022), India (19.2%), China (7.2%), Democratic Republic of Congo (5.5%) and Saudi Arabia (2.7%).
