Nam heads for recession

NAMIBIA is on the brink of a recession as the global economic crisis increasingly takes its toll on diamond mining and tourism.

The Bank of Namibia (BoN) yesterday adjusted its forecast for economic growth this year to a mere 0,4 per cent. Only two months ago, the BoN was still confident that Namibia’s gross domestic product (GDP) would grow by 1,1 per cent in 2009.When breaking the news at a media conference, BoN Governor Tom Alweendo added that the central bank would probably have to review this figure again later in the year as the world’s economic meltdown continues to claim casualties.Old Mutual Group Economist Robin Sherbourne painted an even gloomier picture at a Namibian Chamber of Commerce and Industry (NCCI) gathering yesterday morning. He predicted that economic growth for 2009 would plunge into negative territory to minus 1,6 per cent, officially placing Namibia in a recession. The last time Namibia found itself in such turbulent waters was in 1993 when the economy also contracted by -1,6 per cent.In his State of the Nation address yesterday, President Hifikepunye Pohamba referred to the global recession and its negative impact on Namibia, but steered clear of any predictions on economic growth for this year. He would only admit that ‘the level of economic growth remains low’.A much bigger than expected drop in diamond production convinced both the BoN and Sherbourne to lower their growth expectations for 2009.BoN Director of Research Dr John Steytler said diamond production is now expected to fall by 60 per cent, and not 50 per cent as anticipated at the beginning of the year. Taking this into account, GDP growth is estimated at 0,4 per cent – for now.However, Dr Steytler added that preliminary BoN figures show that tourism arrivals in some instances have already shrunk by 30 per cent. This drop is not accounted for in the bank’s latest economic growth estimate.’We will have to adjust the figure again later this year and it may even be worse then,’ Dr Steytler warned.Stressing the gravity of the situation, Governor Alweendo said: ‘There is only one thing we should not stop doing now. We should not stop encouraging investment.’This particularly concerns investment in infrastructure which will ensure that Namibia ‘is ready’ when the world economy recovers, he said.Government intends pumping N$25,4 billion into the economy this year, of which nearly N$5 billion – 50 per cent more than last year – is earmarked for the development budget.However, taking a closer look at the money Finance Minister Saara Kuugongelwa-Amadhila has allocated to various capital projects in her 2009-10 Budget, Sherbourne said it is clear that Government ‘is not putting a lot of effort into the quality of projects’.Some N$80 million is going to military bases, N$340 million on military research and development, N$215,5 million on State House and an office for former president Sam Nujoma. ‘How much of this is going to lead to economic growth?’ Sherbourne wondered.In comparison, primary schools will receive N$73,1 million, secondary schools N$65,5 million and the Green Scheme N$92,5 million.’It is easy to spend lots of money quickly,’ Sherbourne said, urging that project spending and to what extent it will stimulate the economy should receive careful consideration.Like many other analysts, he also questions Government’s ability to spend the entire development budget. In 2006-07, when the development budget totalled N$1,9 billion, 96 per cent of it was spent. When the development budget was increased to N$2,1 billion the next year, Government only managed to spend 88 per cent. Now that the development budget has reached N$5 billion, Sherbourne couldn’t but wonder how much money will be left over.’Even it is just N$400 million, it is N$400 million that could have been used for something else,’ he remarked.Turning to Kuugongelwa-Amadhila’s economic growth prediction of 1,1 per cent for 2009, Sherbourne said he doesn’t think the Minister believes her own economic forecast. She only anticipates an economic slowdown, not negative growth, which doesn’t warrant the ‘fiscal looseness’ in her budget, Sherbourne maintained.President Pohamba yesterday failed to mention the economic crisis think tank which was established after he instructed Trade and Industry Minister Hage Geingob and the Cabinet Committee on Trade and Economic Development to advise Government on required interventions as part of a survival strategy for Namibia. The think tank finished its blueprint last week.jo-mare@namibian.com.na