WITH global growth having been in a crisis and in the process plunging a number of emerging-market currencies in free fall, economic growth in Sub-Saharan Africa (SSA) is now projected to slowdown in 2016 with a modest recovery projected for 2017 on the back of moderate commodity price recovery.
Economic growth in Sub-Sahara Africa is expected to slow to 1.6 percent in 2016, from 3.3 percent in 2015, before recovering to 3.3 percent in 2017. The expected slowdown in 2016 is due to low commodity prices and constraints in the energy and communication sectors. In addition, the slowdown in SSA will be driven by unfavourable external conditions such as weak demand from Eurozone and from China.
Growth in South Africa is projected to drastically slowdown during 2016 due to lower export prices, labour unrests, weak investor confidence, low power generation and lower household expenditure. In essence, Namibia’s real GDP growth is projected at 4.4 percent and 5.4 percent for 2016 and 2017, respectively. The projected growth for 2016 represents a slowdown from the preliminary national account estimates of 5.7 percent for 2015, with the expected slowdown in 2016 mainly attributed to the decline in growth of the construction sector, as well as, the diamond mining sub-sector.
Despite this, the central bank reported last week that there are notable improvements in the uranium mining sub-sector and a lesser contraction in the agriculture sector despite the fact that these developments may not be sufficient to avoid a slowdown in overall growth for 2016. The central bank further assumes that over the medium-term, growth will be supported by increased mining output from new and existing mines, and sustained growth in wholesale and retail trade.
It is however imperative to realise that the outlook faces more critical challenges. Risks to the domestic outlook include low commodity prices that may lead to deterioration in the country’s terms of trade and exert pressure on both the current account balance and the international reserves. Electricity supply fears seem to have eased, but Namibia is faced with water shortages, which may further restrain growth in sectors such as construction, beverages, meat processing and agriculture. Increased uncertainties in the South African economy, mainly in the form of low growth and possible changes in credit ratings of the economy are likely to increase exchange rate volatility further with consequential effects on inflation. Furthermore, the persistent drought and adverse weather conditions experienced in the Southern Africa region constitute a major risk to growth in the agricultural sector.
Conclusively, the outlook looks somewhat bleak although growth is projected to improve during 2017, largely on the back of expected recovery in both diamond mining and agriculture.
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