Rosy growth prospects fading

Jo-Maré Duddy – Economic prospects for Namibia in 2018 remain under pressure with both the World Bank and the Bank of Namibia (BoN) which sliced their growth forecasts for this year.Releasing its Global Economic Prospects on Tuesday, the World Bank said it expects the Namibian economy to grow by 3.0% in 2018. This is a whole percentage point less than the institution’s forecast in June. The latest forecast for Namibia is also below the average of 3.2% that the World Bank forecasts for Sub-Saharan Africa this year.In its Economic Outlook Update for December, the BoN penned in projected growth of 2.2% for 2018, significantly less than the 3.8% the central bank predicted in July.Both the BoN and the World Bank also cut their growth estimates for last year.The BoN now expects that Namibia’s gross domestic product (GDP) expanded by 0.6% in 2017 compared to 2.1% it estimated in July. The World Bank thinks the economy grew by 1.7%, down from the 3% it projected in June.Not only is the World Bank’s latest estimate less than the regional average of 2.4% it expects for 2017, it also places Namibia under the ten economies with the lowest growth in Sub-Saharan Africa last year.The World Bank’s forecast for Namibia is in contrast with its global view.Global economyFor the first time in many years, the World Bank's outlook for the overall global economy is better than expected rather than worse, with all regions seeing improved growth.However, the bank warns that countries must make investments to improve their growth prospects, and the time to do that is before the next economic crisis hits, as it inevitably will."The big story is a good story. Global growth stronger than what we expected," World Bank economist Ayhan Kose told AFP, noting that all the forecasts are better than those in the June edition of the Global Economic Prospects report.Kose, who heads the World Bank's Development Prospects Group - which twice a year prepares the global economic forecasts - notes that the world is seeing "highly synchronised" economic expansion across regions.That includes solid growth in the "big three" advanced economies - the United States, the eurozone and Japan - and improvements in the important emerging market economies.In addition, large commodity exporting economies like Russia and Brazil - that were struggling and saw their economies contract in 2016 - recovered last year.Since the last forecast in June, the World Bank has upgraded nearly all of its forecasts, with global economic growth now expected to rise to 3.0% for 2017, three-tenths of a point higher than the prior estimate.Growth is expected to hit 3.1% this year, and 3.0% in 2019.Advanced economiesThe biggest gains are in advanced economies, which were revised up four-tenths for 2017 and 2018, to 2.3% and 2.2%, respectively.But for 2019 and 2020, those economies are seen slowing to 1.9% and 1.7%, the report said.Euro area growth was revised up 0.7 points to 2.4% in 2017, and another 0.6 points to 2.1% for 2018.The United States saw a smaller upgrade to 2.3% last year and 2.2% this year, while Japan rebounded to 1.7% in 2017 and an expected 1.3% this year.The report raised its forecast for China in 2017 by three-tenths to 6.8%, and sees 6.4% GDP expansion this year.The efforts by central banks to keep interest rates low has helped stabilise the global economy and fuelled the recovery, Kose said in an interview.RegionEconomic growth in sub-Saharan Africa is projected to rise to 3.2 percent in 2018 and to 3.5 percent in 2019, on the back of Firming commodity prices and gradually strengthening domestic demand will drive better-than-expected growth in Sub-Saharan African, Xinhua quotes the World Bank report. Although the growth is forecast to rise in the years 2018 and 2019, it will remain below pre-crisis averages, partly reflecting a struggle in larger economies to boost private investment. South Africa is forecast to tick up to 1.1% growth in 2018 from 0.8% in 2017, and the recovery is expected to solidify, as improving business sentiment supports a modest rise in investment. However, policy uncertainty is likely to remain and could slow needed structural reforms, warns the World Bank. Nigeria is anticipated to accelerate to a 2.5% rate this year from 1% growth in the year just ended. An upward revision to Nigeria's forecast is based on expectation that oil production will continue to recover and that reforms will lift non-oil sector growth. And growth in Angola is expected to increase to 1.6% in 2018, as a successful political transition improves the possibility of reforms that ameliorate the business environment. However, given demographic and investment trends across the region over the longer term, structural reforms would be needed to boost potential growth over the next decade, according to the report.It further warned that excessive external borrowing without forward-looking budget management could worsen debt dynamics and hurt growth in many countries. Protracted political and policy uncertainty could further hurt confidence and deter investment in some countries. It said that rising government debt levels highlight the importance of fiscal adjustment to contain fiscal deficits and maintain financial stability. Structural policies, including education, health, labor market, governance, and business climate reforms, could help bolster potential growth.RisksKose also cited "downside risks continue dominating the [global] outlook”.He warned that "history will repeat itself," and like all recoveries, "this expansion will end at some point."Risks include rising debt levels, which are more concerning given that central banks are beginning to raise interest rates and could do so more quickly if the recovery starts to ignite inflation, Kose said.Another risk are the "escalating trade restrictions".While Kose did not specifically name the United States, President Donald Trump has taken a very aggressive stance on trade policy.The Republican has targeted China, hitting Beijing with numerous trade complaints, and sought to renegotiate free trade agreements, including the NAFTA pact with Canada and Mexico.The World Bank said its report was "a clarion call for public action" to prevent growth from slowing.Kose said increasing the ability of countries to grow faster is "the single most important issue for the global economy."RecommendationsThe World Bank recommends a combination of improvements in education and health systems; high-quality investment; and labour and business reforms that together "could yield substantial long-run growth dividends and thus contribute to poverty reduction".Removing obstacles to getting women into the workforce is a key component for many countries, Kose said.Potential growth was 2.5% from 2013 to 2017, 0.6 percentage points below its average a decade ago, with an even steeper decline in emerging market and developing countries, the bank said.That decline is expected to widen further without investment."To arrest and possibly reverse this decline in potential growth, emerging market and developing economies need to accelerate investment in both physical and human capital," the World Bank said."Today, the costs of neglecting these principles have gone sky-high." – Additional reporting by Nampa/AFP/Xinhua

Rosy growth prospects fading

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Namibian Sun 2025-05-16

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Rosy growth prospects fading

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Namibian Sun 2025-05-16

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