10 July 2018

Namibia: Real GDP Growth to Improve to 1.9 Percent in 2019 - BoN

Windhoek — The Bank of Namibia (BoN) projects the country's real GDP growth to improve from 0.8 percent in 2017 to 0.6 percent and 1.9 percent in 2018 and 2019, respectively. However, the growth projections are weaker than the 1.4 percent and 2.1 percent forecasted during February 2018, reflecting the disappointing growth rate for 2017 that was published in the Preliminary National Accounts for 2017. Earlier expectations about growth in the uranium sub-sector have also been lowered, given the sustained weakness in the international uranium prices and domestic producers' response to it.

The BoN's July 2018 Economic Outlook Update, published on Friday, noted that the country's consumer price inflation rate, that averaged 6.2 percent in 2017, is projected to moderate to around 4.0 percent and 4.5 percent in 2018 and 2019, respectively.

"Risks to domestic growth include a meagre recovery in the country's trading partners, slow recovery in international commodity prices particularly for uranium, undue exchange rate volatility and uncertainty about weather conditions. Should the economic recovery in Angola stall, it would also continue to reverberate in sectors such as wholesale and retail trade, education and real estate and business services, worsening growth prospects in these sectors. Furthermore, a slowdown in demand for minerals from China will also increase the risk to projected growth for primary industries. International trade wars may also inhibit Namibia's exports, while uncertainty regarding property rights in South Africa may weigh on the country's economic prospects," read the latest report.

Meanwhile, economic growth in the Sub-Saharan region amounted to 2.8 percent in 2017 and is projected to rise gradually during 2018 and 2019 to 3.4 percent and 3.7 percent, respectively, as the outlook for commodity exporting economies improves.

BoN pointed out that South Africa's growth rate is expected to strengthen from 1.3 percent in 2017 to 1.5 percent in 2018 and 1.7 percent in 2019 (IMF, April 2018). In addition, business and consumer confidence is expected to gradually improve with the change in the political leadership but growth prospects remain weighed down by structural hold-ups and uncertainty about property rights. The latest projection by the South African Reserve Bank (SARB) is for the South African economy to grow by 1.7 percent in 2018.

Also, growth in Angola is expected to increase to 2.2 percent and 2.4 percent in 2018 and 2019, respectively, from an estimated 0.7 percent in 2017. The expected improvement is due to firming oil prices, a projected expansion in the non-oil sectors and more favourable terms of trade. Meanwhile, Angola's banking sector continues to recover on the back of an improving economic environment and regulatory reforms.

According to the International Monetary Fund in its World Economic Outlook (WEO) for April 2018, the global economic growth strengthened to 3.8 percent in 2017 and is expected to continue its upward momentum to reach 3.9 percent in both 2018 and 2019. The IMF projects that global growth will be supported by favourable market sentiment, accommodative financial conditions together with international spin-offs resulting from expansionary fiscal policy in the United States.

The expansion in global output for 2017 was underpinned by improved performances in both the advanced economies and the emerging market and developing economies. The 2017 global growth was on the back of recovery in global trade coupled with an investment recovery in advanced economies, continued strong growth in emerging Asia and improvement in emerging Europe. A partial recovery in commodity prices also supported conditions for commodity exporters.

According to the WEO for April 2018, the balance of risks to the near-term forecasts remains two-sided and broadly balanced. The continuing recovery in investment could nurture a rebound in productivity, implying higher potential growth in the period ahead. In turn, a spurt in potential output would expand the scope for demand to rise before it hits capacity constraints and generates inflationary pressures. Risks to growth include a worsening of trade tensions and the imposition of barriers to cross-border trade, which not only have a direct negative impact on economic activity but also weakens confidence. Furthermore, a possible accumulation of financial vulnerabilities and erosion of support for global economic integration that could spur an inward shift in policies remain as risks, together with a host of non-economic risks, including geopolitical worries and climate shocks. Subsequent to the release of the April 2018 WEO, some of the risks in the trade war area have started to materialise and may present a drag on longer-run global economic growth.

Namibia

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