The recession forecast for the global economy by the IMF and World Bank will hit demand for basic goods, raising the risks of falling GDP for Namibia, writes New Era LIVE on February 2, citing the Rand Merchant Bank (RMB). Africa Year Ahead forecast.
FirstRand Namibia economist Ruusa Nandago explained the report’s findings for the publication: “The weak global outlook is a key risk to external demand for mining commodities and tourism services. Therefore, we expect GDP growth to slow from 4.1% in 2022 to 3.0% in 2023.”.
However, he noted, despite declining growth, “It remains above its five-year historical trend, supported by the major industries most strongly associated with mining and exploration”.
The Economist warned that mining and exploration activities would not necessarily lead to significant improvements in employment and consumer potential, as these industries account for less than 2% of Namibia’s total employment.
“We expect consumption to adjust as disposable income comes under pressure after two years of rising inflation and interest rates, exacerbated by limited job opportunities, weak real wage growth and high levels of of debt. The consequences of this were already evident in the weak growth observed in the private sector of loans to households and in the residential real estate market in 2022”.Nandago said.
“In terms of investment, in 2023, Namibia will see increased investment related to mining and exploration, green hydrogen pilot projects and NamPower renewable energy projects.”– believe the RMB “daughter” specialist from Namibia.
But at the same time, there will not be a significant increase in total gross fixed capital formation, since the government’s fiscal consolidation program will restrict government capital spending, ”believes the economist.
He also added that Namibia’s construction sector, which continues to contract for the sixth consecutive year, will continue to struggle as planned government spending on capital projects remains modest.
RMB expects domestic inflation to decline in 2023, averaging 5.2% compared to 6.1% in 2022. The slowdown in inflation will come as global inflation slows as global growth slows. slows, oil and food prices normalize, supply chain pressure eases, and unprecedented interest rate increases lower inflation expectations.
Inflationary risks are skewed to the upside, Nandago said, as global oil and food prices remain volatile and susceptible to weather and geopolitical shocks that could lead to more prolonged inflation.
Barring possible additional inflationary shocks, the global monetary policy change is expected to halt or slow the pace of interest rate increases in 2023.
After raising rates cumulatively by 300 basis points in 2022, RMB expects the pace and scope of Namibia’s rate hikes to slow in 2023, with the hike cycle peaking in the first half of the year.
“We expect rates to reach 7.25% by the end of the year, with the cycle of cuts starting in the first half of 2024. The path of interest rates is highly dependent on the path of interest rates in South Africa. , due to the peg of the Namibian currency to the rand”.Nandago explained.
He added that the fiscal balance will be -6.0% of GDP in FY2022/23 and -4.6% in FY2023/24, driven by higher revenue from the Southern African Customs Union (SACU) South African policy by 2022, total SACU transfers have been revised upwards from 31% in 2022/23 and 37% in 2023/24.
Revenue growth will be supported by higher taxes and royalties associated with mining, as well as increased collection efficiency, given the recently established and active Namibia Revenue Agency.
RMB Chief Executive Philip Chapman reaffirmed Nandago’s perspective, adding that despite the challenges rising inflation could pose in many parts of the world, there are opportunities in Namibia that could be explored to mitigate the impact of pricing pressures from disrupted supply chains and historically tight labor. markets.
“The cost of living crisis calls for structural reforms that have a significant direct impact on household disposable income and reduce price pressures. Policies to improve the business climate, invest in skills development and increase agricultural productivity, combined with accelerated investment in clean technology and energy efficiency, could help Namibians mitigate the challenges ahead, thus improving incomes. of households and economic growth, as well as integration”.concluded Chapman.
Source: Rossa Primavera
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