Better off, worse off gap in society widening
27 April 2021 | Economics
The Preliminary National Accounts for 2020 shows the Namibian economy contracted by 8.0%, slightly better than anticipated in the fair case scenario at the end of 2020 of 8.4%.
According to Simonis Storm (SS) in their Quarterly Economic Update, Gross Domestic Product (GDP) per capita in constant prices dropped by 16.6% compared to 2015, when Namibia recorded the highest per-capita income of N$64 023, while Gross National Income (GNI) per capita declined by 11.9% over the same period.
GNI per capita is the total income received by the country from its residents and businesses regardless of whether they are located in the country or abroad, while GDP per capita is total income received by the country from its residents and businesses located in the country.
The contraction in both GDP and GNI per capita implies that Namibians are on average poorer than they were since 2013. However, the decline in per-capita income is not equally shared amongst all Namibians.
Simonis Storm (SS) wrote in their previous economic updates that there is evidence globally of a K-shape recovery, meaning a widening gap between the better off and worse off in society.
Those who can work from home, for instance, are less affected by lockdown rules than blue-collar workers. Those in the informal sector, whether employed or self-employed, are more vulnerable than those in the formal sector, SS said.
Namibia recorded the lowest annual inflation rate in 2020 since Independence. The inflation rate of 2.2% was slightly below the inflation rate of 2.3% in 2005.
Economic growth is expected to remain way below levels needed to create jobs and reduce unemployment in order to improve the standard of living of most of the population, SS added.
“Hence our view remains that there will be no pressure to increase interest rates this year. We expect the Namibian dollar to maintain its strong performance due to the massive liquidity injected in other economies,” SS said.
Tourism recovers strongly due to successful vaccination campaigns in the major source markets and the lifting of travel restrictions but will remain below previous arrival figures.
Increased spending in the United States (US) is weakening the US dollar (USD), which will support containing imported inflation from outside the rand area. Inflation will remain suppressed due to pressure on housing inflation. Stronger GDP growth coupled with containing public expenditure will improve the budget deficit and total public debt, SS pointed [email protected]