Agriculture a strategic sector for economy
05 January 2021 | Agriculture
Thanks to good rainfall, agriculture has emerged resilient, registering a positive growth outcome in the second quarter of last year.
Agribank CEO Sakaria Nghikembua said this suggests that agriculture remains a strategic sector of Namibia’s economy, prompting the need for government to work with the private sector to create an enabling environment and stimulate private investment.
Reflecting on the trends and issues that shaped the economy and the business operating environment during 2020, he said the year started off on an optimistic note where global growth was estimated to hover around 3.3% and 3.4% in 2020 and 2021 respectively.
“Notwithstanding the protracted weak domestic economy, the 2020 growth was initially set to rebound to 1.5% and further rise to 1.4% in 2021, mainly on the back of an estimated recovery in the agriculture, mining, construction and electricity and water sectors.”
But then the coronavirus pandemic emerged and dampened the growth prospects.
Restrictive measures such as lockdowns, limited gatherings and the halt of public events made a dent in public, private and household pockets.
“The coronavirus has created a storm in public finances and laid bare the fragility of the socio-economic structure while testing our resilience,” Nghikembua said.
He added that monetary and fiscal policy have been vital in stemming the spread of the virus and averting economic and social fallout.
However, the massive interventions have left the public sector with record debt burdens and deteriorating fiscal metrics.
“Growth deteriorated in pandemic-fragile sectors such as hotels and restaurants, mining, transport and storage, manufacturing, wholesale and retail trade due to induced travel restrictions accompanied by global financial, trading and commodity markets.”
In the wake of rapidly declining private-sector demand, the economy witnessed business closures that were associated with massive job losses, especially in the tourism industry.
According to Nghikembua, the Bank of Namibia expected the economy to contract by 7.3% last year, with the onset of the deepest recession the country has ever witnessed.
He said inflation remained subdued last year, but food inflation increased significantly, averaging 5% between April and September.
Furthermore, private-sector credit extension declined substantially owing to reduced borrowing appetite by corporates and individuals, albeit a lower borrowing cost.
Nghikembua added that the tough operating environment and uncertainty around new business ventures have also derailed fresh investments in the economy.
Amidst the tough business environment, the economy is expected to gradually recover to 2.6% this year and 3.2% in 2022, he said.
This is based on the assumption that most countries will open their economies, coupled with a gradual uptick in private consumption.
“While there is hope for an economic recovery, there is still great uncertainty on the resurgent second wave of the pandemic and its impact.”
Nghikembua said with growth prospects already weighed down by existing challenges, a further hit on productive capacities and social services could have devastating outcomes.
“Post-coronavirus, economies are likely to face shifts in production and consumption patterns. Therefore, as we emerge from this predicament, it will be critical to reorient public policy and business models towards an attuned reconstruction and building resilience for future uncertainties.”
He further added that Agribank will continue to advance loans and provide advisory services to farmers.
“With the improved rainfall forecast for the current rainy season, we are optimistic that the agriculture sector will continue to rebound.”