Economy slows in Q2

ECONOMIC growth declined significantly as the Gross Domestic Product (GDP) for the second quarter of 2005 went down to 1,1 per cent compared to 4,1 per cent recorded between January and March, the Bank of Namibia (BoN) revealed in its latest quarterly bulletin released on Friday.

Economic grown in the corresponding period of April – June last year was also higher, with real GDP growth recorded at 2,4 per cent. BoN Deputy Governor Paul Hartmann said this decrease was due to slow economic progress experienced in most sectors across the board.”The deceleration in economic growth during the second quarter was reflected in almost all sectors, with the exception of the manufacturing, construction, wholesale and retail trade and repairs sectors,” said Hartmann, adding that this downward trend was in line with developments in the global economy.Growth in the world’s real output decreased during the second quarter, due mainly to the slowdown in economic performances of the dominating economies that include the United States, Euro zone and Japan.Another blow that contributed to the lower figures was the failure by the Government to control its expenditure, as an estimated cash-flow deficit amounting to N$491,7 million – equivalent to 1,3 per cent of GDP – was recorded.”Despite Government efforts to curtail expenditure, the fiscal position of the central Government weakened…This cash-flow deficit is a turnaround from a surplus of 0,6 per cent to GDP witnessed during the preceding quarter, and is also higher than the deficit of 1,0 per cent of GDP realised at the same time in 2004.”Hartmann attributed the situation mainly to a decrease in revenue collection.However, on a positive note, inflation continued to remain relatively low despite fuel price increases, with the annual inflation rate at an average 1,3 per cent during the second quarter of this year compared to 4,3 per cent during the corresponding period last year.There was also growth in money supply between April and June, which increased to 4,3 per cent compared to 4,2 per cent of the first quarter.According to Hartmann, the slight increase in broad money supply resulted from expansion in domestic credit by the depository corporations and other net assets.Said Hartmann, “Although the economy grew at a slower pace during the second quarter of 2005, the economic fundamentals in Namibia remained sound.”The country continues to experience low inflation, while the low interest-rate environment continued impacting positively on the credit extension by depository corporations.”BoN Deputy Governor Paul Hartmann said this decrease was due to slow economic progress experienced in most sectors across the board.”The deceleration in economic growth during the second quarter was reflected in almost all sectors, with the exception of the manufacturing, construction, wholesale and retail trade and repairs sectors,” said Hartmann, adding that this downward trend was in line with developments in the global economy.Growth in the world’s real output decreased during the second quarter, due mainly to the slowdown in economic performances of the dominating economies that include the United States, Euro zone and Japan.Another blow that contributed to the lower figures was the failure by the Government to control its expenditure, as an estimated cash-flow deficit amounting to N$491,7 million – equivalent to 1,3 per cent of GDP – was recorded.”Despite Government efforts to curtail expenditure, the fiscal position of the central Government weakened…This cash-flow deficit is a turnaround from a surplus of 0,6 per cent to GDP witnessed during the preceding quarter, and is also higher than the deficit of 1,0 per cent of GDP realised at the same time in 2004.”Hartmann attributed the situation mainly to a decrease in revenue collection.However, on a positive note, inflation continued to remain relatively low despite fuel price increases, with the annual inflation rate at an average 1,3 per cent during the second quarter of this year compared to 4,3 per cent during the corresponding period last year.There was also growth in money supply between April and June, which increased to 4,3 per cent compared to 4,2 per cent of the first quarter.According to Hartmann, the slight increase in broad money supply resulted from expansion in domestic credit by the depository corporations and other net assets. Said Hartmann, “Although the economy grew at a slower pace during the second quarter of 2005, the economic fundamentals in Namibia remained sound.”The country continues to experience low inflation, while the low interest-rate environment continued impacting positively on the credit extension by depository corporations.”