… Urges broader set of indicators to measure economic development
By Hilary Mare
A broader set of indicators are needed to measure the country’s economic development, as Gross Domestic Product (GDP), as a single measurement, is misleading.
This is according to Namibia Equity Brokers (Pty) Ltd Analyst, Ngoni Bopoto, who was commenting following revelations last week by the Namibia Statistics Agency (NSA) that the domestic economy had contracted by 2.7 percent in the first quarter of 2017, compared to the 4.1 percent growth recorded in the corresponding quarter of 2016.
The poor performance was mainly attributed to the construction, manufacturing, wholesale and retail trade and hotels and restaurants sectors contracting by 44.9 percent, 10.7 percent, 7.4 percent and 9.3 percent in real value added, respectively.
According to Bopoto, the NSA statistics feature revisions for all four quarters of the 2016 calendar year (-1.4 percent from -3.1 percent in 4Q 16), which implies that preliminary GDP figures presented earlier this year will most likely be revised downwards, to reflect a contraction in 2016.
“While it remains the most widely used number, focus on GDP growth, as a measure of economic development, has been critiqued around the globe; particularly in a developmental State, such as ours, where it would be beneficial to measure attributes beyond those captured in the national accounts,” Bopoto said.
“For instance, we all realise the importance of the informal sector, which according to the International Monetary Fund (IMF), accounts for about 45 percent of economic output in developing nations. However, the bulk of activity in this sector is not captured by the GDP measure. Similarly, the depletion of natural resources and environmental degradation are not accounted for, as these are considered to have been provided free, by nature. Perhaps the most misleading element of GDP is that economic activity conducted by multinationals within the borders of a country is ascribed to the country, whereas most of the economic benefit accrues to non-resident entities,” Bopoto said.
GDP have been in the spotlight over the years and analysts have on a number of occasions questioned the methodology used by the NSA, in arriving at GDP figures.
“The basic numbers do not make sense on the real GDP side, of the supply side tables. However, the nominal figures generally look okay,” local economist Rowland Brown said last year.
“This suggests that there is an issue in the deflator, which is 11.7 percent, relative to the NCPI (National Consumer Price Index) of 4.7 percent in 2014.
“While not alike comparisons, one is consumer prices and the other producer prices; they should be vaguely similar, which has been the case for a few years.
“If this is corrected, the real growth figure will increase, more in line to what it should be, given the high frequency indicators available in the country,” Brown added at the time.
In its reporting, the NSA also noted that slower growth was also observed the financial intermediation, transport and communications and fishing sectors, which registered 0.1 percent, 0.7 percent and 4.6 percent in real value added, respectively.
“Financial intermediation, public administration and defence and health sectors all recorded slower growth, in real value added, of 0.1 percent, 0.7 percent and 7.1 percent, respectively, in the first quarter of 2017, compared to strong growth of 3.6 percent, 8.2 percent and 12.5 percent, in the corresponding quarter of 2016,” NSA Statistician General, Alex Shimuafeni, lamented.
In contrast to the slow growth, sectors such as agriculture, mining and quarrying recorded double digit growth of 10.5 percent and 16.8 percent, respectively, compared to the contractions recorded in the corresponding period last year.
In addition, the water and electricity sector also posted strong growth of 6.1 percent, compared a marginal growth of 0.3 percent in real value added, registered in the same quarter of 2016.
“The data is broadly in line with our expectation, and reflects the sentiment on the ground, given that the period under review was the last of an extremely challenging fiscal year. We remain of the opinion that while the outlook is precarious, 2Q17 numbers will most likely show an improvement, aided by renewed focus in the new fiscal year, the continued recovery in diamond mining and agriculture, prospects of improved Southern African Customs Union (SACU) receipts and statistical factors, owing to a low base,” Bopoto said.
Confidente. Lifting the Lid. Copyright © 2015