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Sunday 20 January 2019
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Is Calle being too optimistic?

Finance Minister Calle Schlettwein is optimistic that economic activities will pick up in 2017, relative to 2016 due to general price stability, with stable or even falling inflationary levels.  The Minister said monetary policy which has assumed a neutral stance is key in the recovery of the economy. Schlettwein made these remarks at a stakeholder engagement under the banner ‘Repositioning Namibia in the Regional Integration Age’ in the capital this week.  He said: “There is reasonable optimism that economic activity will pick up pace this year, relative to 2016. We expect the recovery to be gradual, given the localized recessionary pressures since the third quarter of 2016. The year 2017 started off on a cautionary note of weak domestic demand conditions, a relatively flat investment function, slackness in exports and slowing Government spending against the backdrop of the short-run effects of fiscal correction in the last quarter of the 2016/17 fiscal year.”   But despite his optimism, the situation on the ground tells a different story. More businesses continue to lay off workers and closing down, government services have been cut to the bone and public spending is literally on idle mode. Economists have castigated government for sacrificing projects to cut costs, with some stating that the country will not move out of the prevailing financial predicament if government does not induce growth. Schlettwein however noted that there are some positives which converge into a reasonable basis for brighter medium-term prospects such as the outputs in the mining and agriculture sectors which have rebounded.  According to the minister, the recovery of commodity prices in the mining sector remains soft. However, the minister was quick to point out that a natural hedge for uranium prices at Swakop Uranium Mine promises for increased exports and is supported by activity in the off-shore diamond sub-sector.

 
“We see the momentum on exports and other inflows relative to imports already contributing to the narrowing of the Current Account deficit. This is further reinforced by the effects of the fiscal consolidation programme,” Schlettwein heaped praise on government’s austerity measures.  “My proposition today is to look at the critical success factors for repositioning Namibia’s regional integration agenda. But before I delve into this regional factory log jam, allow me to briefly reflect of the state of our economy and our perspective on the medium-term outlook.   “No doubt, the fiscal policy consolidation stance has allowed us to rebalance the budget and align expenditure to a more realistic macroeconomic and revenue outlook. The preliminary outturn for 2016/17, where revenue collection is in excess of 99 percent of the revised estimates, testifies to the effectiveness of this internal rebalancing,” added Schlettwein.  Furthermore, due to the early gains of government’s consolidation policy and the medium-term positive outlook, renowned rating agency, Fitch, upgraded Namibia’s national rating from AA+ to AAA – which distinguished Namibia from the South African national ratings – South Africa being the benchmark market for Namibian bonds.

 
In June this year, Fitch also reaffirmed Namibia’s sovereign credit rating at the BBB- investment grade.  However, despite the yielding positive results, government was aware that the austerity measures carried with them consequences that will hit Namibia hard in the short term.   “We are conscious that fiscal adjustment is not painless in its effect on operational activities of Offices/Ministries and Agencies and the feedback effects on the economy in the short-run. Thus, in this environment of fiscal and monetary policy neutrality, efforts to enhance the growth-friendliness of policy interventions are necessary to lift the growth potential of the economy,” he added.  At this joint gathering, Schlettwein took time to highlight the role played by the Economic Association of Namibia (EAN).

 
He said EAN provided a platform for discussing contemporary policy developments and forward looking perspectives, with great latitude of independence and objectivity in the country.   “I appreciate the public discourse and the collaborative arrangements in qualitative research, whose output is material in illumination of public policy and private sector development,” he said. In the same way, the minister added that the theme which the conference chose to interrogate (Regional Integration Opportunities for Namibia) was timely as it came at time when Southern Africa Customs (SACU) which has rededicated itself to its mission and elevated the goals of industrial development, Value Chain participation and as nucleus for regional integration.

 
In addition, Schlettwein said Namibia ought to prioritize articulating and implementing strategic actions to improve its productive capacity by gaining increased shares in regional value chains. The minister added that through SACU’s regional integration and trade creation, smaller open economies such as Namibia had an opportunities to reap benefits which are greater than the sum of the individual member countries. Schlettwein called on the private sector participate in the actively in the economy as opposed to taking a backseat position.  “We invite the private sector as the engine of growth to play an active role in driving investment activity in the economy, rather than assuming a more wait-and-see position. New economic opportunities became available through the recently enacted Public Procurement and Public Private Partnership Acts,” noted the minister.




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