The construction industry will continue to experience difficulties this year, PSG Namibia Analyst, Shelly Arnold, has predicted.
“We expect the hard times in the construction sector to persist throughout 2017 as fiscal consolidations are set to continue and investment in the mining sector has stalled,” she said this week.
The Namibia Statistics Agency (NSA) confirmed last week that the economy had entered into a recession after it contracted by 2,7 percent in the first quarter of 2017.
The construction industry, which was a key growth driver in recent years, contracted by a massive 29,5 percent in 2016 following an expansion of 27 percent in 2015.
The construction boom collapsed as mining and other large infrastructure projects were completed in 2015 while Government suspended construction projects to contain rising public debt.
Arnold said encouraging signs of a recovery in mining and agricultural activities were being outweighed by the poor performances in the construction, wholesale and retail sales and manufacturing sectors.
Arnold, however, believes the manufacturing sector will recover during the remainder of 2017 in line with increased output from mining and agriculture due to the strong links with these sectors.
“We forecast a slight rebound in growth to 2,6 percent in 2017 from 0,2 percent in 2016,” she said.
The PSG Namibia Analyst cautioned that further economic stagnation and credit downgrades in South Africa and the possibility that commodity prices could move sideways in 2017 pose significant downside risks to their growth forecast.
Recession impact
Commenting on the impact of a recession on the economy, Leonard Kamwi, a public policy advisor at the Namibia Chamber of Commerce and Industry (NCCI), said a reduction in production means either lower aggregate salaries or wages earned during that quarter, lower profits, and or lower Government taxes. “So, it has an impact on employment, prices in the economy and general welfare of the people. The specific impact is dictated by how the Government, businesses and the people would deal with the reduction in their incomes,” Kamwi said.
He said the country must remember that lower incomes means lower money deposited with banking institutions which affects banks’ liquidity and willingness to lend.
“In other words, although we know the variables that can be impacted, we need to see the statistics in these areas to ascertain the impact because we are talking about human behaviour at the end of the day,” Kamwi said.