By Hilary Mare
AFTER four consecutive quarters of negative growth rate, Simonis Storm Securities (SSS) has revised its annual growth forecast from 2.8 percent to 0.5 percent.
The firm has also revised its forecast for 2018, from 4 percent to 2.5 percent
“The revision was premised on the fact that Swakop Uranium, which is expected to be the world’s largest producer of uranium, is only anticipated to start exporting by the beginning of the fourth quarter of 2017 (Q4 2017), while our previous forecast was based on the assumption that it would start exporting by the first quarter of 2017,” Frans Uusiku, an economist with SSS, said.
The firm also maintained its annual inflation forecast of 6.8 percent for 2017, as the cost of utilities remain highly elevated, despite a favourable domestic currency.
“While we do not expect interest rate cuts this year in South Africa, and also not in Namibia, we nonetheless expect a loosening of the monetary policy cycle in 2018 (with a 25 basis point cut expected for Namibia), as South Africa’s inflation falls within the preferred band of 3-6 percent, but also to support growth in general. We therefore prefer longer-end bonds,” Uusiku said in elaboration.
Simonis and Storm also noted that emerging market currencies have continued to rally, despite deterioration, in terms of their trade.
“In our view, the rally in emerging market currencies has been driven largely by an improvement in the carry trade, as investors continue to chase yields. We do, however, believe that this rally may come to an end, as the market expects the Federal Reserve (the American central banking system) to continue tightening its monetary policy,” Uusiku said further.
In a media conference last week, Finance Minister Calle Schlettwein, Minister of Finance highlighted that the preliminary estimates for the First Quarter of this year, suggest that economic activity remained subdued, with a contraction of about 2.7 percent estimated for the period.
“The construction and manufacturing industries in general have come under persistent pressure, in part due to the base effects of realigning the budget as well as the depressed prices of metal commodities such as uranium,” he said.
“When adopting the fiscal consolidation programme, we remained conscious of the growth implications and we have taken due consideration that the pro-growth dimension is reinforced overtime. For this reason, the size of development budget, which is projected to increase from N$6.7 billion this year to about N$9.0 billion by 2019/20 is one such measure.
“This is also complemented by infrastructure investment programs of the Public Enterprises in such sectors as energy, ports, roads and water. Government has also embarked on the structural policy reforms to crowd-in the private sector investment through PPPs and public procurement, while the public finance institutions remain key catalysts for private sector development. “We, therefore, remain optimistic that growth prospects will gain more traction as the year progresses, with increased activity in the mining, agriculture and tourism sectors anchoring the outlook,”Schlettwein said.
Government also announced that for 2016/17 financial year, the revised budget of N$61.5 billion was fully implemented, with the implementation rate standing at about 100 percent based on the preliminary data, amidst tight cash flow conditions.
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