By Hilary Mare
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.
Essentially for Namibia the current year growth for the economy is seen to be significantly slowing, from 5.3 percent recorded last year to about 4 percent, or even lower.
Attributing to this has been due to external as well as domestic factors which impact on Namibia as a small, open economy as Finance Minister Calle Schlettwein has widely alluded to.
Firstly, low commodity prices as a result of low external demand and supply side factors. This impacts on production and profitability levels for commodity-based industries of mining, fisheries, and agriculture.
Secondly, the slowdown and low demand in major trading partners. The emerging market economies, which have been a source of growth since the global financial crisis are undergoing tough, adjustment times. China, which is the main market for mineral commodities, is experiencing its lowest growth rate of about six percent. Other BRICS economies of Brazil and Russia are already in a recession.
Further, the South African economy, which is the most closely linked to Namibia, is growing at about 0.1 percent. At the same time, Angola, which is another main trading partner and source of external demand for Namibia is undergoing difficult times due to the oil price collapse. This is already adversely affecting the national retail sector.
Namibia is thus wedged between two large neighbouring economies and trading partners which are faced with severe structural challenges. The low growth for the South African economy is a concern not only for trade, but taxes from trade, especially SACU receipts.
Financial market conditions, at home or abroad, are significantly weaker. Internationally, the outflow of capital from emerging markets and developing economies has led to tighter market conditions as well as the flow of investment to these economies.
In conclusion, 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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