GDP growth slows as investment drops

Slowing investment demand and weakening inflation dynamics in 2013’s second quarter have analysts predicting that Namibia may only see the central bank adjusting its repo rate by 2015. In its October monthly ‘Global Markets Research of Sub-Saharan Africa’ report, financial services company RMB suggests GDP growth to average 5.8% over the third and fourth quarters of 2013, accelerating from Q2’s 2.3% and Q1’s 1.9%. “Our view is that growth will reaccelerate from the third quarter onwards as some of the cyclical issues in the mining and manufacturing sector re-adjusts,” FNB head of research Daniel Motinga, who contributed to the Namibian findings, said this week. According to Motinga, weaker volumes and lower quality diamond production resulted in a 10% contraction for the mining industry between April and June, although the uranium subsector was said to have performed well. Another sector that suffered over the period was construction, which contracted by 17%, continuing a downward trend started in the first three months of the year, and bringing the sector to its weakest form in recent years. Commenting on the manufacturing sector, he said the priority industry grew marginally by 1.1% in Q2, compared to a 10.3% decline in the first quarter. As for tourism, he said external demand remains the biggest contributor, while domestic tourism has been failing to benefit from higher consumer spending. “Overall, we believe consumer spending should accelerate for the remainder of the year, but will not be sufficient to offset the slowing investment demand,” Motinga said. “We foresee some consolidation opportunities in this sector, especially as the ongoing drought conditions and the recalcitrant recovery in Europe puts further strain on the sector.” With regard to price rises, he said goods inflation fell by 1.3% month on month in September, on account of a drastic slowdown in food inflation, to 5.2% year on year. A deflation in women’s clothing and adult footwear, he added, slowed clothing and footwear inflation, and indicate “intense supply-side price competition”. In conclusion, Motinga noted that the weakening growth environment characterised by the weakening inflation dynamics and slow GDP growth outlook, the odds of a central bank rate change still in this year, either in Namibia or South Africa, were “near zero”. “A rate cut is not on the cards in South Africa as the May monetary policy statement was all about downplaying the prospect for cuts while also dampening tightening fears. “We believe the South African Reserve Bank (SARB) will start tightening only in Q1 2015,” he said. “Interest rates should therefore stay flat for the duration of this year.”