Economy shrinks in nine quarters
The overwhelmed economy has registered poor growth for nine consecutive quarters now, while the last positive growth was recorded in the first quarter of 2016.
In simple terms, a quarter is a three-month period within which economic activity is recorded in an economy’s financial calendar.
In real terms, the economy as a whole dropped by 0.2% during the second quarter of this financial year compared with the same time of 2017.
Experts have observed that the revisions for the first quarter 2018 resulted in a slightly stronger contraction than initially estimated.
Economic growth was revised downward from -0.1% to -0.2%, which is mainly due to a stronger contraction in the wholesale and retail trade sector (-1.6% instead of -1.3%) and lower growth in the real estate sector (0.5% instead of 1.1%).
In contrast, the tourism sector performed slightly better and contracted by 4.8% instead of 5.3%. ?
The highest employer in the Nmaibia economy, agriculture, contracted by 1.1% in the second quarter 2018 after positive growth of 1.4% in the first quarter.
The poor performance of the agricultural sector in the second quarter was caused by a decline in livestock marketed, since farmers decided to restock their herds due to better rainfall than in the first quarter.
This decline was also reflected in the second quarter trade statistics as the value of cattle exported to South Africa on-the-hoof dropped. ?
The fisheries sector contracted by 8.0% in the second quarter compared to a decline by 13.6% in the first quarter 2018 and a contraction by 4.0% in the second quarter 2017.
The decline was caused by two factors: lower landings and rising fuel costs. ?
The ugly picture is not present in the mining sector, however, as it showed strong growth of 22.4% compared to growth of 4.7% in the first quarter 2018.
It is the strongest quarterly growth since the fourth quarter 2012 (31.4%).
Diamond mining (30.5%) and uranium mining (62.3%) were the driving forces behind the strong performance of the mining sector.
However, uranium mining benefited from a strong increase in output during June that could not be maintained in July. ?
On the other hand, the manufacturing sector suffered from the strongest contraction (-12.5%) of all economic sectors in the second quarter.
Despite the increase in output of diamond mining, value added by diamond processing declined by 7.8%.
Meat processing (due to re-stocking of herds) and fish processing (due to lower landings) declined by 12.2% and 8.1% respectively.
Value addition in other processing activities of commodities, such as basic non-ferrous metals (-33.3%) and non- metallic minerals (-26.0%) also dropped strongly as did value addition of the beverage industry (- 12.9%). ?
The construction sector maintained the momentum in the second quarter that it gained during the first quarter 2018 and expanded by the same growth rate of 23.8%.
It is the strongest growth in the sector since three years.
During the second quarter 2015, the construction sector expanded by 29.6%.
However, real value added of N$973 million in the second quarter 2018 remains one of the lowest since the end of 2012.
The sector ‘hotels and restaurants’ experienced the worst first half year since 2013.
The sector – usually used as a proxy for the tourism sector – contracted by 4.8% and 2.6% in the first and second quarter 2018 respectively compared to contractions of 6.2% and 1.6% during the corresponding quarters of 2013.
The sector contracted despite the increase in tourist arrivals at Namibian airports by 14% in the first half of 2018 compared to the first half of 2017 and despite a depreciation of the Namibia dollar against the Euro by 4.3% and 3.6% in the first and second quarter 2018, which should usually support tourist spending.
Revenue from taxes on products showed a strong decline of 5.5% after a contraction in the first quarter 2018 by 0.4%.
Revenue amounted to N$1 979 million, the lowest amount since the second quarter of 2014, when it stood at N$1 845 million.
Unless revenue from other tax sources and non-tax sources has increased, the figures suggests that it might be challenging to achieve the fiscal targets.
Economist, Klaus Schade has advised that Namibia needs to continue to improve the business and investment climate in order to attract domestic and foreign direct investment into manufacturing activities and into the service sector, since Government’s fiscal space is limited to stimulate the economy.
“Investment in these sectors is also needed to reap the benefits from the ongoing investment in Namibia’s infrastructure,” he said. ?