Spent consumer drains Receiver's tax coffers
Higher unemployment, less wages and lower household income are likely to increase bankruptcies, liquidations and auctions, analysts say.
28 September 2018 | Economics
The drag due to the long-term damage will still prevent the recovery from reaching its full potential over the next three years. - Indileni Nanghonga, Analyst: Simonis Storm
Taxes on products have now recorded eight consecutive quarters of negative growth.
The latest figures released by the Namibia Statistics Agency (NSA) show product tax dropped by N$75 million or 3.7% from the first to the second quarter. Compared to the second quarter in 2017, the tax fell by N$116 million or 5.5%.
Commenting on the new GPD stats, Klaus Schade, research associate of the Economic Association of Namibia (EAN), said unless revenue from other tax sources and non-tax sources has increased, the figures suggest that it might be challenging to achieve the fiscal targets.
Budget documents tabled by finance minister Calle Schlettwein in March target an estimated N$13.3 billion from domestic taxes on goods and services in the current fiscal, which started at the beginning of the second quarter. This target will help Schlettwein to contain the budget deficit for 2018/19 at about N$8.3 billion and limit total debt to an estimated 45% of gross domestic product (GDP).
The slump in taxes on products is a reflection of the depressed consumer, the bust in the wholesale and retail sector and the overall economic recession. Wholesale and retail in the second quarter spent its seventh consecutive quarter in the red, while the overall economy has recorded nine consecutive quarters of negative growth.
“Namibia has had an anaemic growth for a prolonged period and we desperately need the economy to strengthen,” Simonis Storm (SS) analyst Indileni Nanghonga reacted to the latest growth figures.
Higher unemployment, less wages and lower household income are likely to increase bankruptcies, liquidations and auctions, Nanghonga said. “Education, private capital investments and economic opportunities are all likely to suffer in the current downturn, and the effects will be long-lived,” she said.
In addition, SS expects higher budget deficits, low revenue - tax collections, inflows from the Southern African Customs Union (SACU), VAT and income tax - and lower capital spending, whilst operational expenditure persists.
SS currently forecasts economic growth of 0.6% for 2018, followed 1.8% next year.
“Economies often see rapid growth during recovery periods (as unused capacity is returned to work), but the drag due to the long-term damage will still prevent the recovery from reaching its full potential over the next three years,” Nanghonga said.
“We have had 28 years of prosperity, the world had at least two recessions during that time, and we are just catching up.”