Namibia: COVID-19 Wipes Out Positive Economic Signals

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Analysts have said the slack in tourist numbers and a drop in the appetite for commodities will wipe out the positive growth predicted for Namibia for this year as Covid-19 takes its toll.

The tide has also turned for most countries that expected positive figures.

In February this year, the Bank of Namibia said the Namibian economy would grow by at least 1,5% in 2020 and 1,4% in 2021.

Analysts at Simonis Storm Securities have now revised this positive outlook to a damning negative one for this year.

In a quarterly economics and fixed income report released early this month, the analysts said Namibia's gross output would clock at a negative 2,1% this year with a slight expansion of 0,0% next year from their pre-COVID-19 forecast of 0,9% and 1,5% growth in 2020 and 2021 respectively.

They also forecast that at worst, the economy may decline further to 3,5%, should demand and supply shocks continue because of trade bottlenecks that keep piling up due to lockdown measures.

According to them, the worst-case scenario is highly likely if debt, ill discipline, low commodity prices, prolonged low regional economic growth negatively affecting trade and Southern African Customs Union revenue, and corruption persist.

The report shows that commodity-dependent countries are in for a ride, as the pandemic has adversely affected the outlook for all commodity prices with the Bloomberg commodity index declining by 22% to 62,9 index points by 24 March this year.

Namibia's top exports are all minerals heading to China and Europe, which are all on lockdown and facing declining production.

"The mining sector will be hit hard given the drop in commodity prices due to mounting global fears of the virus," the quarterly report read.

The report adds that countries with close economic ties particularly to China, such as Namibia, through tourism and resource exports are more exposed to the impact of the outbreak.

According to the Namibian Tourism Board, the pandemic has wiped out tourism contribution to the gross domestic product (GDP), as the sector-related income could decline by N$2 billion this year.

Another sector which could drag local recovery further down is construction, as, under the lockdown measure, construction is not an essential service and therefore could experience a massive slowdown.

The building plans completed index also slowed in January 2020, declining by 17,2% to 73,4 index points.

The report also highlights that debt challenge would become more pronounced in the near term, as nominal GDP growth weakens and nations, households and corporates face rising levels of indebtedness.

Daily papers quoted the finance ministry saying the country would not rush to the capital market while it has savings (the N$8 billion sinking fund) which would utilise and potentially roll over maturing debts on the horizon.

The Simonis Storm report also highlights that the global GDP uncertainty index shows extreme global nervousness and high uncertainty as virus fears intensify and many countries implement a national lockdown as a preventive measure.

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