By Megameno Shikwambi
The domestic economy has bogged deeper into the mud, and this time has recorded subnormal growth of -2.6%, right on the back of a Bank of Namibia prediction that it will sink deeper into depression by 1.7%.
The latest results are bad news for a country that is coming from an economic growth summit which took steps to wipe out growth-impediments, attract investiments in order to return back to the normal days.
The second quarter contraction is in stark contrast to the growth that was registered last year about the same time, statistics show.
The economy recorded a contraction of 2.6 percent compared to a growth of 0.6 percent recorded in the corresponding period of 2018.
According to latest information by the Namibia Statistics Agency, (NSA) year on year, real GDP for the second quarter of 2019 stood at N$ 25,515 million (or N$ 25.515 billion) compared to N$ 26,185 million (or N$ 26.185 billion), showing the sum of real value added for sectors shrunk by N$ 670 million. According to the NSA, the deterioration in the economy is observed across major sectors with more than half of the sectors posting declines in real value added. A look at the key drivers of the contraction
The NSA highlighted that the key drivers for the contraction is attributed to ‘Mining and quarrying’ (-20.2 percent), ‘Agriculture and forestry’ (-28.1 percent), Construction (-5.5 percent), ‘Wholesale and retail trade’ (-2.0 percent), and ‘Hotels and restaurants’ (-2.8 percent) sectors, respectively.
Furthermore, moderate declines were recorded in ‘Public administration and defence’, ‘Transport and communications’, Education and ‘Health’ sectors that registered declines of 2.7 percent, 0.9 percent, 0.9 percent and 2.6 percent, respectively.
However, other sectors posted positive performance during the quarter under review. ‘Manufacturing’ and ‘Electricity & water’ sectors recorded improved performance, posting growths in real value added of 18.8 percent and 2.7 percent in the second quarter of 2019. Improved performance is also observed in the financial intermediation and fishery sector, which posted growth in real value added of 1.9 percent and 0.6 percent.
During the period under review, macroeconomic aggregates such as inflation surged up, recording a 4.2 percentage compared to 3.8 percent recorded in 2018.
This represents an increase of 0.4 percentage points, and is largely due to increases in ‘food and non-alcoholic beverages’ as well as ‘alcoholic beverages and tobacco’.
During the quarter under review, imports rose faster recording N$ 19,687 million whereas exports decelerated to N$ 13,288 million, widening the trade balance by N$ 6,399 million.
This is largely due to increase in importation of fuel and reduction in export of diamonds.
Revisions are part of good quarterly national accounts compilation best practices because they provide users with more accurate data.
The Q1 of 2019 GDP has been revised further downwards by 0.9 percentage points from -2.0 percent released in June 2019 to -2.9 percent. This revision is mainly due to updated data received from data sources.
Surprisingly, despite an accommodative monetary policy that has kept the repo rate low at 6.75 basis point, inflation rate of 4.2 percent remain within the targeted inflation band of 3 to 6 percent.
The significant reduction in economic activities is attributed to continued austerity measures by government, weak domestic demand for goods and services, reduced disposable income coupled with drought condition affecting most households.
The domestic economy has entered depression mode with successive quarters of contraction and this has made the jobs outlook gloomier.
Economists at Simonis Storm are predicting yet another interest rate cut. The US Federal Reserve has this week cut interest rates, boosting investor confidence, while the global economy is projected to register weak growth.
The slowdown in the domestic economy has also been felt in the vehicle sales. Vehicle sales fell to a new low of 808 units since 666 units recorded in January 2019.
On an annual basis, vehicle sales declined by 24.5% and by 10.6% on a monthly basis.
The downward trend persists due to lack of consumer spending, low borrowing appetite, depressed business conditions and a sluggish economic environment.
Some factors hindering the growth in new vehicle sales industry are: Weak consumer demand; low borrowing appetite for instalment credit; High unemployment; increasing interest in second hand vehicles; and deteriorating economic environment
Extra heavy vehicles declined the most (55.6% y-o-y) to 24 units in August 2019, followed by a 52.9% y-o-y drop in heavy commercial vehicles to 8 units. Furthermore, light commercial and passenger vehicles also declined on an annual basis by 29.4% and 15.3% to 389 and 360 units, respectively in August 2019.
On a monthly basis, all vehicle segments recorded a decline.
“We are of the view that the new vehicle sales industry will need a catalyst to uphold any upward cycle,” said Indileni Nanghonga, analyst at Simonis Storm.