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Monday 21 January 2019
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Mixed fortunes for 2018: Analyst

Economic Analysts are giving contrasting views over the performance of the Namibian economy in 2018 with Broad Side Capital Private Limited, Investment analyst Ngoni Bopoto forecasting better fortunes while Cirrus Investment Co-founder Rowland Brown says the challenges of this year will continue.

This comes amid a rather challenging financial year that saw the Namibian economy being downgraded twice to Junk Status by both Moody’s and Fitch Rating Agencies because of failure by Government to implement recommended policies within the given period.

“It has been a challenging year as the economy fell into recession with the quarterly GDP numbers reflecting a contraction of -1.7% in both quarter 1 and quarter 2. This was underscored by Moody’s and Fitch ratings downgrades to sub-investment grade on fiscal concerns. Subdued government spending and a consumer economy deep in recession (-7.5% in Q1 and -8.2% in Q2) do not bode well for the performance of the economy in 2017, however we must bear in mind that quarterly GDP numbers are subject to revision,” Bopoto said.

 

According to the last released statement Fitch Ratings downgraded Namibia’s long-term foreign currency issuer default rating (IDR) to ‘BB+’ from ‘BBB-’. The outlook was generally stable.

The Namibian economy faced various challenges in the financial year 2017 as a result of poor liquidity access as well as overspending in the previous years on capital projects. Among the major challenges cited for Namibia’s economic challenges this year was also the slump in Southern African Customs Union receipts which continued fluctuating.

“Government’s fiscal consolidation stance, related knock-on effects, an end to mine development and a protracted recovery in commodity prices all took their toll on economic performance. Our opinion is that an economic recovery will be drawn-out and while performance may improve due to the low base effect, fundamentals will remain weak. We are however cautiously optimistic that moderate improvement in economic conditions around the globe and government’s attempts to balance its pro-growth fiscal consolidation stance may provide support,” he said.

 

Brown argues that, “Generally, the economy remained weak through 2017, and the year is expected to see no growth or a small contraction when final GDP figures are released in 2018. However, despite the slowing general growth picture, the year has shown a few positive spots or green shoots starting to emerge.”

Brown added that there were a number of challenges faced by the economy through 2017, most notably the delayed feedback from slowing commodity prices, which negatively impacted Namibia directly (uranium prices) and indirectly (the oil price and the loss of a great deal of Angolan business).

Brown also argued that the end of a mining-sector-led construction boom resulted in major declines in construction activity in the country severly impacted by the aggressive capital budget cuts pursued by government since late 2016.

 

According to Brown the coming financial year is less likely to bring major rewards for Namibians. “2018 will remain a challenging year for Namibia, as none of the major growth drivers are showing much sign of recovery. However, while we do not expect a rapid recovery, we do believe that some stabilisation will be seen, as has been witnessed in the final quarter of 2017,” said Brown.

He also adds that, “Some possible areas of growth are the mining sector, particularly diamond output, with the possibility of uranium output increasing should the uranium price recover (which is currently unlikely). Added to this, we expect to gain some clarity with regards to the investment and policy environment in the country, and may see private businesses starting to re-invest more actively if these policy proposals are improved.”

 

Brown also added that repatriated pension funds and loans from the AfDB should see some resurgence of construction activity towards the end of the year, as new infrastructure projects kick off.

“The majority of the low-growth we expect, however, will be driven by a reduction in imports and thus improvement in net-exports. Generally, we do not expect to see growth over 2% for the year, unless major policy changes are seen in the first half of the year. We expect households to remain under pressure, and unemployment levels to remain elevated,” Brown concludes.




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