Namibia's international investment position improved during the first quarter of 2019. Thiscomes after the position registered a net liability of N$11,8 billion during the the period under review, a lower position compared to N$15 billion for the same quarter in 2018.
The drop is because the value of foreign assets mainly in the form of portfolio investment, direct investment and international reserves rose faster than the value of foreign liabilities. Quarter-on-quarter, the net liability position decreased by N$7,5 billion mainly due to an increase in the value of all foreign asset categories except for financial derivatives.
Meanwhile, the country recorded a current account surplus of N$1,1 billion in the first quarter, from a deficit of N$1 billion during the same period, last year.
These figures were provided by the Bank of Namibia in its quarterly bulletin last week. The central bank explained that the surplus was mainly a result of the significant narrowing in the merchandise trade deficit.
BoN deputy director for corporate communications Kazembire Zemburuka said the narrowing trade deficit was largely driven by the substantial decline in the values of merchandise imports and, to a lesser extent, the increase in export earnings.
Zemburuka added: "The stock of foreign reserves held by Bank of Namibia increased due to the impact of the second tranche of the African Development Bank loan, coupled with exchange rate revaluations. This resulted in an import cover of 5,4 months at the end of the first quarter of 2019. "
In terms of currency, the Namibia dollar depreciated against all major trading currencies due to tighter global financial conditions, financial market volatility, trade wars and Brexit negotiations, as well as sustained uncertainty regarding land expropriation in South Africa.
The deputy communications director added that activity in the domestic economy slowed during the first quarter of 2019, compared to the same quarter in 2018.
"The decline was mainly reflected in the weaker performance in the mining sector and the reduction in marketing activity in the agriculture sector, especially cattle marketed. Similarly, slower activity was observed in the wholesale and retail trade and the tourism sectors.
The construction sector also recorded weak activity during the first quarter of 2019, as reflected in declines of both public and private construction. Improvements were, however, registered in the manufacturing sector. Namibia's inflation accelerated during the first quarter of 2019 compared to the same period in 2018, mainly driven by food and transport inflation," he said.
Recently, the Namibia Statistics Agency released the first quarter gross domestic product figures, in which they said the economy contracted by -2%, because more than half of the sectors recorded negative growth.
In an emailed response to The Namibian, Tumelo Thudinyane, an investment analyst at Old Mutual Investment Group Namibia said the local economy is theoretically in a depression.
Thudinyane said the economy exhibited a majority of characteristics associated with a depression such as declines in income and production (12 consecutive quarters of negative growth), protracted unemployment and a deflationary economy, with inflation exhibiting a negative trend since peaking in early 2017.
"We should be worried, as there are negative implications for attracting foreign direct investment, as capital would not be perceived to be potentially productive or yield attractive returns given the state of the economy," he said.
He added that for the economy to get out of this slump, the central bank, through its use of policy tools, can help in stimulating the economy by easing interest rates.
"This is, however, a short-term response to the situation, with longer transitory effects over time. Our policy-making bodies and institutions can do more to positively influence foreign investor flows into the country, by improving the ease of doing business in the country, which ultimately addresses an important economic stimulant, namely factor productivity, and productive investments.
"Our recovery from the slump will need to be more broad-based though, with meaningful investment that provides depth and sustainability to our economy," the investment analyst said.
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