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Namibia: Central Bank Optimistic About Blurry 2021

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DESPITE the absence of a recovery strategy and several less responsive attempts by both the central bank and treasury, the Bank of Namibia is optimistic about next year’s growth, which could be termed the ‘vaccine year’.

In its latest December Economic Outlook released on Monday, the central bank also revised the overall 2020 economic output to severe, but not as projected earlier in the year, citing recalculation of the 11 months’ production data.

Coincidentally, the IMF and World Bank revised the world economic outlook from their April projection (4,9%) to a less severe October projection (4,4%), citing improvement in the advanced economies’ production compared to developing economies.

“Namibia’s economy remains weak and is expected to recover moderately in 2021,” the outlook stated.

According to the outlook, overall production is expected to fall by 7,3% in 2020, which is slightly lower than the 7,8% contraction projected in the August 2020 Economic Outlook.

Bank of Namibia explained that from their observation, the production of the primary sector along the year has not declined as projected, thus, they revised the overall country output.

“A slower contraction projected in this economic outlook update is based on year-to-date information, which indicated that the contraction in primary industries during 2020 is likely to be less severe than earlier anticipated,” explained the central bank.

Even though considered a drop in the ocean, the slight decline in output loss for 2020 results from the crop farming sector, which is expected to keep the overall contraction in agriculture, forestry and fishing moderate this year.

“The estimated contraction in the agriculture, forestry and fishing sector was revised to 1,6%, from a high contraction of 7,1% published in the August 2020 Economic Outlook,” said the central bank.

Recalculations were done on mining and quarrying production for the past 11 months, which was expected to contract by 18,6% this year but is now only expected to contract by 10,5%.

However, the central bank maintains that the deep cuts inflicted in sectors most affected by the Covid-19 pandemic-induced travel restrictions and weakening global markets remain unchanged. Meaning, there is little hope for recovery in sectors such as hotels and restaurants, mining, transport and storage, manufacturing, wholesale and retail trade, and construction.

THE UNKNOWN 2021

What we know is that there is a high likelihood that Covid-19 vaccines might be distributed next year to minimise chances of another global lockdown, as the Namibian government has made funds available for the procurement of such drugs.

Consumers and businesses could also base their expectations on the recovery roadmap the government plans to launch through the envisaged second Harambee Prosperity Plan. However, with no details on what route it will take, it would be speculative to base any expectations on it.

The central bank, through its magnifying glass and compounding factors, has projected that outputs will grow by 2,6% next year and continue the upswing into 2022.

“The Namibian economy is then projected to recover to growth rates of 2,6% and 3,2% in 2021 and 2022, respectively,” said the central bank’s economists.

The recovery in 2021 will be led by the extractive sector, as in past years, with diamonds expected to recover with growth rates of 2,8% and 16,9% in 2021 and 2022, respectively, while the Chinese destined-uranium will grow by 8,5% and 5,7% in the next two years.

This is because the demand for the country’s minerals is expected to pick up in 2021, as major economies are projected to fully recover.

Manufacturing (diamond polishing, beverages, meat processing) sector production is projected to increase by 3% and 2,7% in 2021 and 2022, respectively.

However, the central bank warned that the economy is not yet out of the woods, as risks to domestic growth – such as ongoing travel restrictions that are in place in many countries – are exacerbated by the second wave of Covid-19 infections in advanced economies.

That means that travel restrictions will most likely continue to impede business activities, causing disruptions to supply.