8 January 2013

Namibia: GDP and Inflation Expected to Up in 2013

NAMIBIAN Gross Domestic Product (GDP) is estimated to grow between 4,3 and 4,5% compared to South Africa's 2,2%. This is largely due to improved sectoral growths especially the mining sector of Namibia.

In the same line, inflation is expected to increase by 5,7% however gradually over 2013 and 2014. This is due to the rise in food prices consequent of the industrial strikes in neighbouring South Africa. Likewise, South Africa's GDP is greatly affected by these unrests.

According to reports released by the Bank of Namibia (BoN) and the Rand Merchant Bank's (RMB) Sub-Saharan Africa Quarterly, major headwinds to the GDP growth outlook for 2013 are linked to the negative export environment.

GDP growth should average 4,3% between 2013 and 2014 due to ongoing investments in the mining sector and a continued recovery in economic output specifically off-shore diamond mining, said the RMB.

"Crucially we see the economy benefitting from the construction phase of the Husab uranium mine, valued at approximately N$21 billion, which is scheduled to begin this year and is set for completion in 2015," said the agency.

Husab mine is said to create between 4 000 and 6 000 jobs.

Despite this optimism, the agency remains realistic about risk factors which could hamper the growth of Namibia's GDP expectations - in particular a continued assertiveness of unions in Southern Africa, particularly in the mining sectors.

"Inflation accelerated over the course of 2012 on account of volatile food and fuel prices related to exchange rate weaknesses, during the latter part of the year, as well as droughts in key food-producing regions." Other key factors included the industrial strikes in South Africa as well as international inflated food prices.

The Bank of Namibia (BoN) said that inflation stood at a percentage of 6,2 at the third quarter of last year and this was due to food price inflation as a result of industrial strikes in South Africa. According to the Africa Quarterly, inflation is expected to lift by 5,7% for the year 2013 and 2014, however, gradually.

Furthermore, the BoN says domestic economic performance was subdued, despite some positives. The mining, transport and tourism sector activities has grown during the review period. However, manufacturing, agriculture, wholesale and retail trade sectors remained sluggish. Total government debt stock increased marginally on a quarterly and annual basis at the end of the third quarter of 2012. Similarly, total loan guarantees rose on a yearly basis but declined on a quarter-to-quarter basis. This means that the ratio between debt and loan guarantees to GDP may have risen but has remained within Government's target bands.

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