The Namibian economy is expected to remain in the woods, with recession expected to continue into 2018, economist Eloise du Plessis of PSG Namibia, said this week.
“While the narrower current account deficit is welcome, as it should support foreign reserve accumulation and the country’s credit rating, it masks some of the domestic economy’s underlying weaknesses.
“The most recent GDP estimates confirmed that Namibia remained in the grip of a recession during the third quarter of 2017 and that the economy will likely record a slight contraction for 2017 as a whole,” Du Plessis said.
The narrowing of the current account deficit was largely due to a substantial decline in the import bill, which reflects weak local demand for foreign goods due to ongoing fiscal consolidation and a slowdown in local economic activity, particularly in the construction sector.
Du Plessis said although the Southern African Customs Union (SACU) revenues also assisted in narrowing the deficit in 2017, these revenues are expected to decline somewhat in 2018 due to a revenue adjustment caused by weaker-than-projected revenue.
“Nevertheless, it is encouraging to see that a meaningful recovery in diamond and uranium exports is underway, despite suppressed market prices for these commodities.”
She said Namibia’s current account deficit is set to narrow much faster in 2017 than PSG had projected earlier and will likely close in on the 2.5 percent of GDP level.
The current account deficit is expected to widen somewhat during 2018, due to rising fuel import costs and lower SACU revenues, only partially being offset by improved exports.
The Bank of Namibia fourth quarter bulletin for 2017, showed that deficit on the current account narrowed significantly on an annual basis during the third quarter of last year.
The current account deficit narrowed to N$400 million in the third quarter of 2017 compared to a deficit of N$5.6 billion during the same quarter in 2016.
This was mainly attributable to a decline in the merchandise trade deficit as well as higher SACU receipts and inflows on the services account.
According to the Bank of Namibia, the value of manufactured exports rose 10.6 percent year on year, thanks mainly to increases in proceeds from processed fish and meat as well as refined zinc.
Export earnings from live animals also rose substantially on account of a rise in exports of weaners and small stock to South Africa.
The statistics showed that Namibia has continued to source most of its imports from South Africa (69.2 percent), followed by China (7.7 percent), the Euro Zone (3.4 percent) and India (three percent).
Namibia imports most of its vehicles, mineral products and consumer goods from South Africa. The main imports from China were arms and ammunitions, machinery and vehicles, while those from the Euro Zone were mainly vegetable products and machinery.