Government confirmed independent projections that the domestic economy will not recover this year, but will contract by 1.5 percent contrary to its initial projected growth rate of 0.2 percent estimated in the budget.
“The domestic economy has been adjusting to shocks and re-calibrating to a more sustainable growth pattern,” Finance minister Calle Schlettwein said in his Budget Review statement delivered this week.
“This Budget Review and the Medium-Term Budget Policy Statement places a high premium on achieving economic recovery, sustainable growth and strengthening fiscal sustainability as the necessary conditions for economic progress and social transformation.”
The minister, however, maintained that a marginal recovery is projected next year and the year after.
“The domestic economy is projected to gradually emerge from the recession in 2020 with a moderate growth rate of about 0.8 percent and about 1.3 percent by 2021, averaging 2.0 percent over the next MTEF,” he said.
“While the economy is projected to recover in 2020 and over the next MTEF, the projected pace of recovery is low and insufficient to translate into real growth in per capita incomes.”
According to the Finance minister, government will be rolling out various economic stimulus packages to spur the domestic economy.
“A public expenditure and growth stimulus package consisting of increased development expenditure of about N$8 billion, including the roll-out of the N$4 billion AfDB funded project financing for agricultural mechanization, rail and road infrastructure and educational facilities rehabilitation programme. This will further be reinforced by water infrastructure rehabilitation and expansion programme, to the value of N$2.5 billion in the initial roll-out phase. This stimulus package will be strengthened with the roll-out of the SME financing facilities at the Development Bank of Namibia, starting with the launch of the Credit Guarantee Scheme, Mentorship and Training Programme, and the Skills-based lending facility for the youth,” Schlettwein said
“The implementation of some of these measures has already started, and these will speed up over the MTEF.”
He said recessionary pressures were being felt in most sectors of the economy, with the tertiary sector, which accounts for about 57 percent of the GDP, expected to remain in recession for the rest of year.
“From the demand side, the recessionary pressures are reflected in weak consumption demand, both private and public consumption, slackness in investment and a slowdown in exports. From the industrial perspective, the deeper than expected contraction in 2019 is due to the contractions in primary industries; decrease in the agricultural sector as the severe drought takes toll on the sector; and the contraction in the diamond mining sub-sector, induced by the lay-off and maintenance of some of the mining’s capital assets, “ the Finance minister said.
“The recessionary pressures is easing in the construction sub-sector, thanks to increased public and private capital expenditure, and the positive growth in the manufacturing sector. These are estimated to have lifted the secondary industries out of recession in 2019.This Budget Review and the Medium-Term Budget Policy Statement places a high premium on achieving economic recovery, sustainable growth and strengthening fiscal sustainability as the necessary conditions for economic progress and social transformation.”
The Finance ministers’ statement comes as Bank of Namibia Governor, Iipumbu Shiimi on Wednesday reveled the local economy remained weak, with the apex bank projecting it to remain so for rest of the year.
“Domestic economic activity continued to slow during the first eight months of 2019, compared to the corresponding period of 2018. The slowdown was reflected in sectors such as mining, construction, wholesale and retail trade and agriculture. On the contrary, the manufacturing sector improved during the same period. Going forward, the domestic economy is projected to remain weak in 2019,” he said.