Namibians poorer than they were in 2015
Gross Domestic Product (GDP) per capita has dropped by about 8.3% during the first quarter continuing a trend that started in 2016.
15 July 2021 | Business
We must keep in mind that we compare a Covid-19 economy with the pre-Covid-19 economy. Simonis Storm (SS)
The 2020/21 Private Sector Development Survey revealed that micro and small businesses were more affected by the pandemic than medium and large enterprises.
Furthermore, workers in the informal sector are more vulnerable and less protected than formal sector employees. Hence, the gap between the better-off and the less privileged is widening, Simonis Storm (SS) stated in their recent quarterly economic report.
According to the Namibia Statistics Agency (NSA), the real Gross Domestic Product (GDP) dropped by 6.5% during the first quarter of 2021, compared to a decline of 2.5% recorded in the same quarter of 2020.
GDP is the total value of goods and services produced over a certain period of time and represents the wealth of a country.
Therefore, if Namibia’s GDP has to been divided amongst the entire population of 2.5 million (GDP per capita), each individual is likely to become less wealthy as a result of a decline in GDP.
According to SS, the 6.5% decline in GDP represents the worst first quarter results. “We must keep in mind that we compare a ‘Covid-19 economy’ with the ‘pre-Covid-19 economy’. We expect a return to positive growth rates in the second quarter of 2021. GDP per capita has dropped by about 8.3% during the first quarter continuing a trend that started in 2016. On average, all Namibians are poorer now than they were in 2015. It is obvious, however, that the economic downturn over the past five years has not affected everyone to the same extent,” SS pointed out.
“Recent corrections by the NSA to the Gini-coefficient for 2015/16 highlights that we have not made the required progress in reducing income inequality,” SS said.
The Gini-coefficient measures income inequality and ranges from zero (perfect equality) to one (complete inequality) declined only slightly from 0.600 (2003/04) to 0.576 (2015/16).
“Furthermore, while we have made good progress in reducing income poverty, the Multi-dimensional Poverty Index (MPI), that captures the deprivation of people in eleven indicators across three main categories, living standards, education and health highlights that 43.3% of the population are deprived in at least 30% of the sum of the weighted indicators used,” SS said.
The deprivation is in particular stark when it comes to sanitation and housing. It is a clear indication that economic growth alone is not sufficient to improve the standard of living. Consequently, investment into economic infrastructure while necessary must be supported by investment into social infrastructure to provide the necessary basis for the population to exploit economic opportunities, SS pointed out.
Overall price increase softened slightly during May 2021 resulting in an annual inflation rate of 3.8% compared to 3.9% in April. A slow-down in price rises for alcoholic beverages and tobacco and for transport from 4.2% to 3.5% and from 7.5% to 7.3% between April and May respectively outweighed accelerated price increases for food and non-alcoholic beverages that stood at 6.6% in May compared to 5.9% in April, SS added.
Prices for housing, water and electricity continued to rise only moderately (1.3%). Food price inflation is of global concern. The United Nation (UN) World food price index increased to 39.7, the highest level since 2011. It can in part be explained with supply-side disruptions due to restrictions imposed to contain the Covid-19 pandemic. Food price rises affect the poor more severely than other groups of society since they spend a higher share of their total consumption on food, SS said.