Nam to stay on recovery road

THE Namibian economy should continue to pick up in 2011, although the pace of the recovery might just be slower than that of last year when the gross domestic product (GDP) bounced back by between 3,2 per cent and four per cent after having contracted by 0,7 per cent in 2009.

Fresh 2011 forecasts by local economists vary from four to five per cent. Old Mutual Namibia economist Robin Sherbourne expects about five per cent, while Bank Windhoek economist John Steytler is working on four per cent. ‘Maybe more, depending on how aggressive Government’s fiscal policy is going to be,’ he told The Namibian yesterday.Steytler expects Government to continue to stimulate the economy, spending more as it tries to curb Namibia’s 51 per cent unemployment rate. There is enough money in the state kitty to do so, the economist believes. ‘In my view, when I look at Government accounts, Government is still in a very strong fiscal position. Therefore, I expect Government to continue with fiscal stimuli. This will also provide an additional boost for the economic activity during 2011,’ he said.Consumers are expected to start spending across the sector, boosting the economy. ‘Now we have a thirty-year-low interest rate environment. This is good for future investments. It has also reduced debt levels of individuals a bit. So, there is more spending by individuals to buy property or vehicles,’ Steytler said. Also driving recovery will be mining, particularly uranium and copper, he said. Despite the rosy outlook, Namibia should closely monitor the global economic recovery though.’We remain cautiously optimistic that in 2011 the recovery will continue … But what might continue to haunt us is the question of what will happen to the world economy, especially the European crisis,’ Steytler said.The growth outlook for Europe, where the sovereign debt crisis has been intensifying, remains modest, with cuts in public finances expected to weigh for years, Reuters reported yesterday. Analysts polled by the news agency last month expected quarter-on-quarter growth in the euro zone to peak at 0,5 per cent over the next two years.There are different channels as to how the European crisis could impact on Namibia, Steytler said. ‘The one is obviously through the exchange rate channel. We have already seen during 2010, as a result of the European crisis, the euro has weakened and when the euro weakened, our currency strengthened. This again impacted on our export competitiveness. This scenario might continue in the next year,’ he said.Steytler said there were also other factors putting upward pressure on domestic exchange rates apart from the European crisis. ‘There is still a lot of so-called ‘cheap money’ in the world (in particular in the USA and Japan). Some of this ‘cheap money’ is finding its way into our economy, in particular the South African economy, which puts upward pressure on the currency. This currency-strengthening poses some risks for the export related sectors,’ Steytler said.Reflecting on 2010, Steytler said it was an ‘interesting year’ in which Namibia escaped mostly unharmed from global economic turmoil. He expects the domestic economy to have grown by ‘around four per cent’. Sherbourne said the economy ‘enjoyed positive if unspectacular growth during 2010’. He is sticking to his forecast that the GDP expanded by only 3,5 per cent for the year.