Several economists who spoke to the Windhoek Observer this week were coy about the optimism expressed by President Hage Geingob and Finance Minister, Calle Schlettwein, who both said the ailing local economy was now on a recovery path.
Speaking at a news conference at State House on Monday, Geingob said he believes the economy is recovering because the country had received good rainfall during the last rainy season.
He said there is recovery in the agricultural sector, in both crop production, where a bumper harvest is expected, and in livestock farming, where there has been an uptick in meat prices.
The president also noted that consumer price inflation has been on a downward trajectory during the past six months, hitting a low of 6.1 percent in June.
He added that the Government’s liquidity position had also improved after Treasury secured a credit facility with the African Development Bank.
Independent Economist, Mally Likukela, said Geingob and Schlettwein used ‘lead indicators’ that are used to predict the future health of the economy.
“Such indicators, if nurtured and supported properly, could cause a recovery, but they are not guaranteed, as they are merely indicative.”
Schlettwein announced that the Government plans to honour outstanding invoices worth N$3.8 billion.
Likukela said the payment of unsettled invoices will create the much-needed liquidity in the economy and will jump-start and support economic activities.
He said the non-payment of invoices resulted in serious cash-flow challenges for many businesses, forcing them to utilise overdrafts.
“Layoffs and suspension of projects were all linked to the non-payment of these invoices,” he said.
Geingob also said that liquidity conditions had improved remarkably as evidenced by the oversubscription of Government bonds.
“The oversubscription in the demand for bonds will improve Government liquidity,” the president said.
Ngoni Bopoto, a research analyst at Namibia Equity Brokers, said he was cautiously optimistic that the worst is behind the country.
He said comments from commercial banks indicate that the liquidity crisis, which impacted the economy around this time last year, has dissipated.
Bopoto said the decision by the Government to pay outstanding invoices will lend impetus to an economic recovery and improve liquidity.
Shelly Arnold, a research analyst at PSG Namibia, said while the economy performed dismally last year, the firm predicts a slight rebound in 2017, mainly on the back of an expected strong performance in mining exports as diamond production recovers and output at the new gold, uranium and copper mines is ramped up.
“The water-dependent agricultural and manufacturing sectors are also expected to achieve moderate recoveries as good rainfalls have continued to bring relief from the worst drought on record.”
Arnold said the headline inflation rate is expected to decline slowly over the course of 2017, and does not expect an interest rate hike in Namibia for the remainder of the year.
PSG expects Namibia’s current account deficit to narrow down to 6.5 percent of GDP in 2017 from 11.7 percent of GDP in 2016.
“The narrower deficit in 2017 reflects our forecast of higher export volumes and improved SACU inflows on the back of an improved growth outlook for the region. Although the current account deficit is projected to narrow further over the outer years of the medium term, we expect Namibia to run a current account deficit into the foreseeable future, due to the structural trade deficit.”
Despite the projected improvement in 2017, SACU revenues are also expected to remain under pressure over the medium term as South Africa – the largest contributor to the SACU revenue pool – suffers from slow growth.
Simonis Storm Securities Economist, Frans Uusiku, said the Government revenue squeeze had eased, following stronger inflows from SACU and a secured loan from the African Development Bank.
“This would mean that the outstanding invoices for Government services providers will be honoured, thereby supporting domestic spending and growth,” he said.