The private sector expects economic growth for the Namibian economy to be slower-unlike in 2015 where many expected economic growth to remain unchanged, the Simonis Storm annual economic survey has revealed.
The survey results were released at the Simonis Storm Annual Economic Outlook presentation in Windhoek this week. The survey is based on interviews with businesses, asset managers, commercial banks, insurance companies, agro and agri businesses, miners, manufacturers and contractors.
According to the survey results, Namibians revealed that the five main risks facing Namibia at the moment include the drought, regional political instability, unemployment, government’s fiscal position as well as policy regulation.
It showed that 75.5% of interviewees expects capital expenditure in Namibia to be lower this year. In comparison, 55.7% of respondents expected expenditure to be higher in 2016.
Only 20.3% of those interviewed are confident about the demand for Namibian goods and services this year compared to 64.7% in 2016.
Inflation is also expected to increase, with 64.4% of those interviewed indicating so. Last year 50% of the interviewees expected an inflation hike.
“There is need to broaden the tax base to increase revenue for the state coffers and our tax policy should be flexible and dynamic to respond to the economic needs of the country,” said Simonis Storm’s director for research Purvance Heuer, who presented the survey results.
Heuer said Government must adopt a more focused approached when it comes to developing expenditure plans.
He also underscored the need to attract more foreign direct investment to improve the country’s current account.
“The current account is highly reliant on SACU receipts. More than 90% of inwards transfers are SACU receipts. A slowdown in global trade and more protectionist global trade policies will put pressure on regional economies, especially Namibia due to its high reliance on SACU revenue. The introduction of new airlines to Namibia from the Middle and Far east will provide some respite,” said Heuer during the presentation of the survey’s results.
About 64.4% of those interviewed, expects foreign direct investment in Namibia to be lower this year. The expectations for lower FDI for 2016 was around 38.9%.
Regarding hiring and laying off prospects in the country, more than half of the respondents expects the situation to remain unchanged this year.
Asked about a possible International Monetary Fund(IMF) bailout considering Government’s falling revenues, 61.7% of the respondents do not believe that Namibia will need an IMF bailout.
About 67.8% of respondents expect unemployment to increase this year.
A majority of the respondents also believe that Government responded appropriately to the latest Fitch report.
Most respondents also expect salaries to increase this year.
During the presentation, Heuer also touched on the ever-escalating public wage bill.
Employment in the public sector was 84,216 in 2012, 82,844 in 2013, 95,875 in 2014 and 104,908 in 2015. This signifies an increase of 24.6% over the period.
“The public wage bill as a percentage of total spending was just below 42% in 2015 and just above 36% in 2016. We do not expect significant change over the medium term,” he said.
Despite Government vowing to cut-out non-essential expenditure such as travel allowances, vehicles, maintenance expenses and office furniture, Heuer pointed out that the outlined expenses account for less than 5.0% of the total operational budget.
“We thus believe that there is little scope to further curb expenditure without comprising on effective public service delivery,” he said.
Government’s ability to sustain its debt remains a concern.
Namibia’s Debt to GDP ratio is expected to rise to 42.4% by 2016/17 and 41.3% in 2017/18.
Meanwhile, the borrowing plan for domestic debt for the 2016/17 was revised upwards by 7.2% and 2.8% for 2017/18.
While the global economy is expected to struggle to muster growth of more than 4% this year, countries that have been hardest hit by the decline in commodity prices are urged to prioritise macroeconomic stability, the International Monetary Fund said in a report published this week.
“For the countries hardest hit by the decline in commodity prices, the recent market firming provides some relief, but the adjustment to reestablish macroeconomic stability is urgent. This implies allowing the exchange rate to adjust in countries not relying on an exchange rate peg, tightening monetary policy where needed to tackle increases in inflation, and ensuring that needed fiscal consolidation is as growth friendly as possible.” The IMF said this in its World Economic Outlook which gives an update of all key world economic projections.
The latter, said IMF, is important in countries with pegs where the exchange rate cannot act as a shock absorber. “Over the longer term, countries highly dependent on one or a few commodity products should work to diversify their export bases.”
In October while delivering his Mid-Year Budget Review Policy Statement, finance minister Calle Schlettwein said domestic economic growth is estimated to have slowed to about 2.5 percent in 2016, a significant deceleration from the 4.3 percent projected in the budget and a marked slowdown from the robust growth rate of 5.3 percent recorded in 2015.
“The major constraint on 2016 growth, is due, in part, to the low external demand and fall-out from lower growth and domestic developments in the large regional economies of Angola and South Africa, the impact of the severe drought on the agricultural sector, the completion of large investment projects, constrained water supply for industries such as construction and beverage industry and the depressed commodity prices impacting on the mining sector,” said Schlettwein at the time.
The minister blamed low commodity prices, the prolonged drought condition as well as currency and exchange rate shocks for the diminished short-term growth prospects in the country.
IMF expects economic activity to pick up pace in 2017 and 2018, especially in emerging market and developing economies.
“However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications. The assumptions underpinning the forecast should be more specific by the time of the April 2017 World Economic Outlook, as more clarity emerges on U.S. policies and their implications for the global economy,” noted the report.
Just across the border, the global lender expects the South African economy to grow by 0.8% in 2017.