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Namibian Economy Expected to Improve in 2019


AFTER experiencing negative growth over the last 10 quarters, the Namibian economy is expected to rebound in 2019, going forward.

The Bank of Namibia (BoN) said in their economic outlook report for December 2018 that despite economic challenges, they are expecting the economy to recover to a positive growth rate of 1,5% in 2019 from a contraction of 0,2% in 2018.

The central bank observed that the main risks to domestic growth include a weak recovery in the country’s trading partners, and a slow recovery in international commodity prices, particularly for uranium.

According to the BoN, if Namibia was to encounter a slow demand for minerals from their trading partners such as China or France, then the country’s projected growth will be at risk, especially for the primary industry.

Based on the BoN’s predictions, the growth for the primary industry is expected to massively decline from 8,3% in 2018 to 0,7% in 2019.

However, overall growth in the secondary industry is expected to slightly improve to 2,2% in 2019 from 0,3% in 2018.

The tertiary industry has incurred negative growth of 1,4% in 2017 and 1,5% in 2018. However, the bank predicts that in 2019, the industry will incur a positive growth rate of 1,8%.

The slower growth in the primary industry is a result of the closure of one mine in the diamond sector. Growth for uranium is also expected to slow to 3,6% in 2019.

“Growth for the agricultural sector is expected to stabilise around 4% in 2019 and 2020,” the BoN stated.

Although the fishing industry was estimated to contract by 4,7% towards the fourth quarter of 2018, the central bank is expecting it to grow moderately by 1,4% in 2019.

Growth forecasts for the secondary industry are expected to expand by 2,2% in 2019 from 0,3% in 2018, from severe contractions of 6,7% in 2017 and 6,4% in 2016, respectively.

“The projected recovery in the secondary industries is expected to originate from an improved growth in manufacturing and lesser contractions in the construction sector,” the bank said.

Furthermore, the manufacturing sector is expected to expand further by 2,3% from growth rates of 1,7% and 1,3% in 2018 and 2017, respectively.

This expansion in 2019 would be supported mainly by grain mill products and beverages.

The electricity and water sector, on the other hand, is expected to decline slightly in 2019. However, construction is projected to gradually improve to a positive growth rate of 1,6% in 2019 from a contraction of 5,2% in 2018.

Even though the bank predicted the tertiary industry to incur positive growth of 0,3% in the economic outlook report of July 2018, the outcome is that the industry was projected to have contracted by 1,5% by the last quarter of 2018.

“The downward revision was mainly based on weak outcomes in sectors such as wholesale and retail trade, real estate and business services, transport and communication as well as the public sector,” the Bank of Namibia said.

Simonis Storm Securities said in their economic outlook for 2019 that although these sectors have experienced slower growth in 2018, they are expected to improve in 2019.

They added that despite adverse global developments which occurred in 2018, the local mining sector outlook for growth remains strong, with the real gross domestic product to grow by 1,1% in 2019.

A research associate at the Economic Association of Namibia, Klaus Schade told The Namibian that high production levels at the Husab mine would also benefit the mining sector to some degree in 2019.

Another economist, Mally Likukela, observed that 2019 will be less hard than 2018 as economic agents have found ways to survive and keep afloat.

He added that positive growth in Namibia’s trading partners would boost the local economy, and the usual economic activities that spring to life in the election build-up will spur the economy to some extent.

“Getting out of the woods will take longer, mainly because the balance sheets of most corporations and individuals were shattered severely, and the deeper-than-expected impact of the fiscal consolidation will further slow down the recovery process,” Likukela said.

He added that the growth rate would most probably remain flat, and inflation would hover around 5%.

Recovery in the international prices of commodities could help the mining sector, but the looming drought will work against it, he noted.

Fuel price hikes – The Namibian

CONSUMERS must brace themselves for another tough month as fuel prices were increased for a fourth consecutive month, with analysts predicting that prices will continue on an upward trajectory for the remainder of 2018 (…)
Economic Association of Namibia research associate Klaus Schade added that the continuation of the depreciation of the Namibia dollar against major currencies as well as oil supply-side uncertainties owing to the ban threatened by the United States administration on Iranian oil from November onwards are likely to exert further upward pressure on domestic fuel prices (…)

Read the full article in The Namibian

A single African currency: What it would mean for global currencies? New Era

WINDHOEK – There has been speculations in recent years as to the real reason behind the removal of Libya’s Muammar Gaddafi with one of the most popular theories being that he was in the process of establishing a single gold-backed currency for Africa called the Gold Dinar. Many conspiracy theorists are of the opinion that Gaddafi’s new plan for Africa would have meant an entirely new banking system for the continent which would have taken economic power away from the current western powerhouses and would have dealt a severe blow to the US Dollar-based monetary system.
However, two local economic analysts seem to have opposing views on the practicality of a single African currency, with one saying such an ambitious plan is not pragmatic while the other feels that a common continental currency has the potential for strong value given the world’s dependency on African commodities.
According to Klaus Schade, a research associate at the Economic Association of Namibia, these conspiracy theories are not credible. To support his view, Schade put the African economy into perspective, noting that the Gross Domestic Product (GDP) of the entire Africa amounted to some US$3.4 trillion in 2016 while the GDP of China, the world’s second largest economy, was more than thrice this figure at US$11.2 trillion…

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Upward pressure expected to remain as inflation continues to rise – New Era

WINDHOEK – Continuous upward pressure is expected on inflation, mostly owing to the rising fuel prices, the most recent of which was a 25 cents per litre increase in August, attributed to the adjustment of the fuel tax in August. Although international oil prices have eased slightly, the prevailing sentiment is that the depreciation of the Namibia Dollar will increase the cost of oil in domestic currency which could result in further under-recoveries, meaning the actual costs of fuel are still higher than the pump price.
“If not fully or partly absorbed by the National Energy Fund as in the previous months, under recoveries will lead to fuel price increases. In addition, the municipality has increased bus fares, which will add further pressure on transportation costs,” noted Klaus Schade, Research Associate at the Economic Association of Namibia…

Read the full article in New Era

Balanced policies needed to improve Namibia’s rating – New Era

WINDHOEK – Namibia needs smart policies that balance the need to address the major social challenges of poverty, inequality and unemployment, coupled with having to remain attractive to domestic and foreign investors, analysts and economists said this week. Such policies require a continuation of the close cooperation between the public and private sectors, which if implemented effectively will eventually boost the country’s international credit rating…
According to the research associate at the Economic Association of Namibia, Klaus Schade, while much emphasis is placed on regular economic statistics, such as quarterly GDP figures and quarterly trade statistics, these statistics have to be complemented by social statistics, such as regular labour force surveys that are currently not even conducted on an annual basis…

Read the full article in New Era

Latest Fitch rating a confirmation for continued consolidation – New Era

WINDHOEK – The latest assessment of the Namibian economy by international ratings agency, Fitch Ratings, on Monday affirmed a sub-investment grade rating of BB+ with a stable outlook. Local economists believe that this assessment is a confirmation for continued fiscal consolidation efforts, which have thus far been slow as government struggles to balance consolidation with adequate economic growth, poverty alleviation and a necessary reduction in income inequality…

Also commenting on the latest assessment, Research Associate at the Economic Association of Namibia, Klaus Schade, said Fitch also considered the high wage bill as well as transfers to public enterprises, which remain major challenges…

Read the full article in New Era

Namibia’s junk status remains The Namibian

THERE is doubt that Namibia would regain a positive investment grading, following Fitch Ratings maintaining the country’s rating at junk status.
Analysts said this is because the economy is still faced with hardships, from both the domestic and global front. In November last year, the ratings agency downgraded the country’s credit rating from BBB- to BB+…

Economic Association of Namibia’s research associate Klaus Schade agreed that the current review maintains the 2017 rating, and thus remains one notch below the investment grade of BBB-. “Earlier in May and July, Fitch affirmed the ratings for the Development Bank of Namibia at BB+ with a stable outlook as well as the rating for NamWater respectively. In general, institutions cannot be rated better than the overall country rating,” he said…

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Levy kerosene to boost National Energy Fund – New Era

A local economic analyst has called for kerosene to be included in the petroleum levy, arguing that the exclusion of the highly combustible fuel basically means the government is inadvertently subsidising the cost of air travel. (…)
However, a research associate at the Economic Association of Namibia, Klaus Schade, noted in his recent commentary on the escalating fuel price that kerosene is, in fact, excluded from the petroleum levy, which is then turned over to the National Energy Fund…

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Motorists spared full impact of fuel price increase – The Namibian

THE Ministry of Mines and Energy announced a fuel price increase of N$0,25 per litre for petrol and diesel countrywide, effective from 1 August 2018. The fuel price increase is a result of an increase by the same amount in fuel tax announced by finance minister Calle Schlettwein in his budget statement on 7 March 2018. The fuel tax increase became effective on 4 July 2018, but was only passed on to the consumer through the most recent pump price increase.
It is the third consecutive price increase for petrol and the fourth for diesel. Prices were kept stable for six and five months between December 2017 and May and April 2018 for the two products, respectively…

Read the full article in The Namibian