Namibia’s organic growth looks bleak

PHILLEPUS UUSIKU

Even before the outbreak of the Covid-19 pandemic, Namibia was already faced with various macro-economic challenges ranging from high unemployment, negative growth rates, inequality and reduction in investments.

The Economic Association of Namibia held a public discussion with various economic experts to discuss new policy measures and reforms that can be taken in order to revive the depressing domestic economy.

Ruusa Nandago, group economist at First National Bank of Namibia gave a presentation on Namibia’s economic outlook for 2021.

She notes that 2021 will be a challenging year for both the domestic and global economy. “To ensure sustainable recovery, we need a widespread of vaccine roll-out,” she said.

The Covid-19 regulations that were put in place to curb the spread of the virus brought most of the economic activity to a complete standstill.

Consumer confidence slowed down as many lost their jobs, meaning that they were unable to stimulate the economy through spending.

Business confidence also went down due to an uncertain business environment. Investors will put their resources where they are certain that they will get higher returns for their investment, she added.

The Bank of Namibia (BoN) reduced the repo rate several times last year which currently stands at a historic low of 3.75% to encourage borrowing. Despite interest rates being low, credit uptake for both individuals and businesses remains weak.

Deficit

Over the years, Namibia has been generating less revenue when compared to expenditure resulting in a deficit.

Transparency in the debt incurred as well as responsible spending is of critical importance to ensure that funds are used for the intended purpose and get necessary returns.

In order to reduce the fiscal deficit, the government should increase revenue by collecting more tax es or alternatively cut down on spending.

Cutting down does not mean that the government should spot spending, but rather spend responsibly on activities that will generate the government the much-needed revenue, she said

Public debt as percentage of GDP is expected to reach 69% this year, beyond the local threshold of 35% and 60% set by SACU. In addition, Namibia’s fiscal deficit is expected to reach 10.1%, the highest since independence.

Reforms

Namibia has exhausted 75% of its growth drivers for growth and investment is the only variable that is expected to take Namibia out of this depressing state.

Consumption is constrained by the high unemployment rate, while government spending is constrained because of fiscal pressure. Net exports are affected by low commodity prices.

Therefore, to boost investment, improving the ease of doing busines and create a predictable environment for businesses and investors is crucial.

Lastly, government should focus spending on social safety nets and provision of public infrastructure.

Most importantly, the skills and education gap should be addressed to ensure that graduates are trained according to the industry needs.

Also speaking at the event is Cheryl Emvula, economist at Cirrus Capital, Naufiku Hamunime, commercial banking manager at Standard Bank and Salomo Hei, head of research at High Economic Intelligence who gave more emphasis on the points raised in economic outlook presentation.