Du Plessis opined this week that the country’s trade deficit, which declined to N$29.8 billion in 2016, should narrow further in 2017 as commodity prices and South African growth is expected to pick up moderately, and demand for imports for infrastructure spending ‘owing to the completion of major projects’ and animal feed ‘thanks to improved rain’, tapers off.
Statistics released by the Namibia Statistics Agency (NSA) last week showed that the annual trade deficit narrowed for the first time since 2010 to N$29.8 billion in 2016 from a deficit of N$39.6 billion recorded in 2015.
Du Plessis said the declining trade deficit augurs well for the country’s sovereign rating by ratings agencies.
Last year, ratings agencies, Moody’s and Fitch, revised Namibia’s credit risk outlook from stable to negative, mainly on account of Namibia’s poor policies to reduce its deficits and accumulated debt stock.
Economists warned at the time that a downgrade remains possible and will be inevitable, unless the country makes a number of wholesale changes over the next few months.
“In this regard, we need to recognise that we have been living beyond our means for the past five years, and that we now need to slow debt issuance dramatically, and by extension, reduce spending. In short, we need to embrace the fact that we will have a few years of consolidation, after our past six years of strong growth,” former IJG Securities Head of Research, Rowland Brown, told the Windhoek Observer at the time.
But Du Plessis said this week that the trade deficit feeds into the current account shortfall, which is one of the macroeconomic indicators the international credit rating agencies consider when rating Namibia’s sovereign debt.
She said the import bill remained high in 2016, because of the Namibia dollar that was weaker against the US currency on average last year. She, however, said that in US dollar terms, total imports in 2016 were in fact lower than in 2015.
Du Plessis said large increases in imports of animal feed products for drought affected livestock farmers and rough diamonds for local manufacturing masked declines in boilers, electrical equipment and articles of iron and steel, which probably reflects the decline in construction sector activity.
“Vehicle imports also trended lower, reflecting the decline in domestic vehicle sales and the impact of the tougher economic environment on durable goods sales. Namibia’s export receipts benefitted from the relatively weaker exchange rate and improved diamond, fish and copper ore production.
“However, the slowdown in the South African economy adversely affected exports to the rainbow nation, which declined by 0.7 percent year-on-years,” said Du Plessis.
On a quarterly basis, Namibia posted a deficit of N$14.2 billion in the fourth quarter of 2016 compared to a deficit of N$11 billion in the last quarter of 2015.
Exports in the last quarter of 2016 amounted to N$15.1 billion, representing an increase of 2.1 percent year-on-year while diamonds retained the position as the principal export commodity, accounting for 43 percent of total exports in the fourth quarter.
The value of exports increased by 20.9 percent year-on-year to N$70.9 billion in 2016 and the value of imports increased by a marginal 0.2 percent year-on-year to N$92.2 billion over the same period.
Namibia’s main export partners in 2016 were Switzerland, South Africa and Botswana with 19 percent; 16 percent and 14 percent respectively; while more than half, at 58.7 percent of the country’s imports, are still sourced from South Africa.
The main export products in 2016 were diamonds (33 percent), copper ores (17.5 percent) and fish at 12.4 percent; while the main imports last year were mineral fuels and oils at 12.2 percent, vehicles at 9.1 percent and boilers at 8.2 percent.