Business environment to remain gloomy
The economy was initially projected to grow at 2.2% and 2.5% in 2021 and 2022 owing to a recovery in global demand, increase commodity prices and a stable health environment due to vaccination.
PHILLEPUS UUSIKU
Due to slow and inactive economic activities in some sectors, strengthened by a lockdown in the second quarter of 2021, the Agricultural Bank of Namibia (Agribank) has revised its economic growth outlook down to 1.5% this year.
The increase in the number of Covid-19 deaths, even in the business world, triggered investment uncertainty for new business ventures. Consumer and business environment will remain gloomy for the remainder of the year, Agribank said.
Although the Covid-19 restrictions eased during the first quarter of 2021 (1Q2021), the pandemic continues to impact economic sectors and all aspects of our lives. Thus, the economy shrank further by 6.5% during the 1Q2021 compared to a negative growth of 2.5% in the corresponding quarter of 2020.
The poor performance can be attributed to diminished demand by both international and domestic consumers, Agribank pointed out.
The recent lockdowns, travel and gathering restrictions due to a rising Covid-19 cases cast renewed fears for downward revision of initial growth projections. The soft outlook is exacerbated by the sluggish 1Q2021 GDP numbers. The economy was initially projected to grow at 2.2% and 2.5% in 2021 and 2022 owing to a recovery in global demand, increase commodity prices and a stable health environment due to vaccination.
PRICE MONSTER
Lack of actual improvement in productivity and reinvestment in real economic drivers amidst prevailing low interest rate environment could fuel an economic collapse when spiralling inflation leads to rising interest rates soon. Inflation doubled to 4.1% in June 2021 when compared to a 2.1% recorded in the prior year.
Food, and non-alcoholic beverages category is on an upward spiral, increasing to 7.3% in June 2021 compared to 4.7% in the prior year. The increase can be attributed to a rise in meat and oils and fats prices to 16.0% and 16.7% in June 2021, a similar trend was observed in the beef and sheep producer prices. The rise in global oil prices continues to affect local petrol prices, with a rising in transport cost to 9.6% in June 2021 compared to -0.8% in the prior year. Ignoring inflation to prioritise on social economic goals leaves the economy sitting on a timing bomb that could have an equally devastating effect, the bank said.
SECTORS
The agriculture, and forestry sector is expected to remain positive in 2021, although at a slower pace compared to a 13.9% growth in 2020. The sector is projected to grow by 4.5% and 5.0% in 2021 and 2022, respectively, mainly driven by crop and forestry production. Total number of cattle and sheep marketed year to date ending June, declined by 25% and 5% to 94 868 and 220 045. While goats marketed increased by 63% to 49 690 during the same period. “Due to sluggish livestock numbers coupled with rebuilding of herd, we are of the view that livestock will slack behind, contracting by 1.2% in 2021 before improving in 2022. Forestry production and crop farming remains the beacon of hope for the agricultural sector in 2021. Sheep producer price increased by 34% year-on-year to N$61.42/kg in June 2021, this can be attributed to an increasing demand for sheep amidst low supply. It will take time to rebuild livestock population to pre-drought level,” Agribank pointed out.
The mining sector contributes about 10% to GDP but has recorded a deep contraction of 19% during the 1Q2021. The sluggish performance can be attributed to the poor performance in the diamond and metal ores subsectors. Mining plays a vital role in terms of employment creation, government revenue generation through taxes and royalties coupled with its significant impact on the overall growth of the economy. The increase in commodity prices is favourable for the sector, while rising global demand should trigger investment appetite, Agribank [email protected]
Due to slow and inactive economic activities in some sectors, strengthened by a lockdown in the second quarter of 2021, the Agricultural Bank of Namibia (Agribank) has revised its economic growth outlook down to 1.5% this year.
The increase in the number of Covid-19 deaths, even in the business world, triggered investment uncertainty for new business ventures. Consumer and business environment will remain gloomy for the remainder of the year, Agribank said.
Although the Covid-19 restrictions eased during the first quarter of 2021 (1Q2021), the pandemic continues to impact economic sectors and all aspects of our lives. Thus, the economy shrank further by 6.5% during the 1Q2021 compared to a negative growth of 2.5% in the corresponding quarter of 2020.
The poor performance can be attributed to diminished demand by both international and domestic consumers, Agribank pointed out.
The recent lockdowns, travel and gathering restrictions due to a rising Covid-19 cases cast renewed fears for downward revision of initial growth projections. The soft outlook is exacerbated by the sluggish 1Q2021 GDP numbers. The economy was initially projected to grow at 2.2% and 2.5% in 2021 and 2022 owing to a recovery in global demand, increase commodity prices and a stable health environment due to vaccination.
PRICE MONSTER
Lack of actual improvement in productivity and reinvestment in real economic drivers amidst prevailing low interest rate environment could fuel an economic collapse when spiralling inflation leads to rising interest rates soon. Inflation doubled to 4.1% in June 2021 when compared to a 2.1% recorded in the prior year.
Food, and non-alcoholic beverages category is on an upward spiral, increasing to 7.3% in June 2021 compared to 4.7% in the prior year. The increase can be attributed to a rise in meat and oils and fats prices to 16.0% and 16.7% in June 2021, a similar trend was observed in the beef and sheep producer prices. The rise in global oil prices continues to affect local petrol prices, with a rising in transport cost to 9.6% in June 2021 compared to -0.8% in the prior year. Ignoring inflation to prioritise on social economic goals leaves the economy sitting on a timing bomb that could have an equally devastating effect, the bank said.
SECTORS
The agriculture, and forestry sector is expected to remain positive in 2021, although at a slower pace compared to a 13.9% growth in 2020. The sector is projected to grow by 4.5% and 5.0% in 2021 and 2022, respectively, mainly driven by crop and forestry production. Total number of cattle and sheep marketed year to date ending June, declined by 25% and 5% to 94 868 and 220 045. While goats marketed increased by 63% to 49 690 during the same period. “Due to sluggish livestock numbers coupled with rebuilding of herd, we are of the view that livestock will slack behind, contracting by 1.2% in 2021 before improving in 2022. Forestry production and crop farming remains the beacon of hope for the agricultural sector in 2021. Sheep producer price increased by 34% year-on-year to N$61.42/kg in June 2021, this can be attributed to an increasing demand for sheep amidst low supply. It will take time to rebuild livestock population to pre-drought level,” Agribank pointed out.
The mining sector contributes about 10% to GDP but has recorded a deep contraction of 19% during the 1Q2021. The sluggish performance can be attributed to the poor performance in the diamond and metal ores subsectors. Mining plays a vital role in terms of employment creation, government revenue generation through taxes and royalties coupled with its significant impact on the overall growth of the economy. The increase in commodity prices is favourable for the sector, while rising global demand should trigger investment appetite, Agribank [email protected]
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