Namibia’s gross output is projected to contract by 2.1 percent this year with a slight expansion of zero percent next year, a quarterly report by Simonis Storm Securities shows, reflecting a downward review from the pre-COVID-19 forecast of 0.9 percent and 1.5 percent growth in 2020 and 2021 respectively.
The report also forecasts that at worst, the economy may decline further to 3.5 percent, should demand and supply shocks continue because of trade bottlenecks that keep piling up due to lockdown measures. This could happen if some of the negating factors still persist in Namibia – including debt, ill-discipline, low commodity prices, prolonged low regional economic growth negatively affecting trade, Southern African Customs Union revenue, and corruption.
Particularly, the debt challenge is expected to become more pronounced in the near term, as nominal GDP growth weakens and nations, households, and corporates face rising levels of indebtedness.
The report notes that commodity-dependent countries are more at risk as the outlook for all commodity prices remains gloomy amid the pandemic. By March 24, the Bloomberg commodity index had declined by 22 percent.
That puts Namibia, whose economy revolves around commodity exports, at a huge disadvantage. Mineral exports – primarily diamonds – account for just under 30 percent of the gross domestic product while other commodity exports such as livestock and fish make up the bulk of government earnings. All of its top exports head to China and Europe, which are all on lockdown and facing declining production.
“The mining sector will be hit hard given the drop in commodity prices due to mounting global fears of the virus,” the quarterly report read, adding that countries with close economic ties to China, such as Namibia through resource exports and even tourism, are more exposed to the impact of the outbreak.
Prior to the report, the Bank of Namibia projected growth of at least 1.5 percent in 2020 and 1.4 percent in 2021. However, a drop in the demand for commodities, coupled with a decline in the tourism sector, will most likely wipe out the positive growth predicted for this year as COVID-19 takes its toll. The pandemic has cut tourism contribution to GDP and the sector-related income could decline by N$2 billion this year, the Namibian Tourism Board says.
Another sector that could drag recovery further down is construction, which is not an essential service and could experience a massive slowdown due to the lockdown measure that was on Wednesday extended for a further two weeks – till May 4. Even before the virus outbreak hit African countries, the building plans completed index slowed in January 2020, declining by 17.2 percent.
As a whole, the Namibian economy could lose up to N$10 billion within five weeks due to the nationwide lockdown extension, government estimates show. This is based on an estimated N$2 billion loss a week, N$285 million per day and N$11,9 million per hour. The extended lockdown is aimed at containing the further spread of COVID-19, with cases remaining at 16 confirmed and three recovered.
Meanwhile, the global GDP uncertainty index shows extreme global nervousness and high uncertainty. This reflects intensifying pandemic fears with many countries implementing nationwide lockdowns to curb the outbreak, Simonis Storm added.
