Prospects good for economy in 2004

THE economic prospects for Namibia look good for the coming year, provided the weather and the rand hold up.

This was the view of several economic commentators who expressed their views in the wake of positive inflation data from the Government’s Central Statistics Bureau last week. Johannes !Gawaxab, the Chief Executive of Old Mutual Namibia and previous head of their asset management arm, said the Namibian economy is set to grow faster.This would be because of lower interest and inflation rates, global economic recovery, infrastructure spending and strong domestic consumer demand.”Economic growth of 3,5 per cent is expected during 2004 which is an increase of 0,6 per cent over the estimated growth of 2,9 per cent of 2003.The local economy grew by 2,8 per cent in 2002,” !Gawaxab said in a presentation last week.!Gawaxab said key developments expected to affect the local economy and financial markets this year include the strength of the Namibian dollar, state of the world economy and the extent to which Namibia can prove that democracy is rooted – through its handling of the regional and national elections this year.On prospects for 2004, !Gawaxab said the outlook is “reasonably promising”.”If the Namibia dollar remains at current levels, consumers will benefit but exporters and the tourism sector will be adversely affected, whilst the competitiveness of the country will also suffer,” !Gawaxab said.VOLATILE CURRENCYHe said he expected a lot of volatility in the Namibian dollar around the 6,70-7,50 to the US dollar level over the next three months.The consensus forecast for the next twelve months, he said, ranges from 6,70 – 8,10 against the US dollar.!Gawaxab said the recent weakening of the local currency was caused by confusion on the South African government’s land policy (a new land bill is being discussed), “sentiment changes with the South African election this year”, the South African Reserve Bank intervening in the Foreign exchange market to buy foreign currency, SA trade figures (in November 2003 the SA trade balance had a deficit of R4 billion), and global “hedge funds” taking profits.However, he said the current depreciation “does not mean we have a new round of serious weakening of the currency” The rand, and thus the Namibian dollar, has come under pressure of late, a local currency trader told The Namibian, with foreign investor jitters ahead of a general election in South Africa likely to weaken the currency slightly in coming weeks.However, one said, these concerns, which centre on possibility the ANC could toughen up the country’s land reform policy, were not really justified at this stage.”The ANC has pursued market-friendly policies since it took power,” said the trader, who asked he not be named.PROSPECTS FOR GROWTHLocally, the Consumer Price Index (CPI) plummeted at the end of December 2003 to its lowest level since independence, namely 2,05 per cent.This is a month-on-month decrease of 1,54 per cent and primarily attributable to a reduction in prices of food, transport, and communication, !Gawaxab explained.Meanwhile, local asset managers Investment House Namibia (IHN) last week forecast an average of only four per cent annual inflation this year.Last year, inflation averaged 7,3 per cent, and was recorded as high as 13 per cent in late 2002, an increase which is widely seen to have slowed growth, as it caused the Reserve Bank to hike interest rates in an effort to keep price rises to a minimum.IHN said inflation may rise slightly in the later part of the year, but was unlikely to go much above six per cent, the upper end of the target the South African Reserve Bank has set for managing the overall level of price increases.It said that the rand would be key in whether Namibian inflation and interest rates remained at a reasonable level.Whether there is renewed drought in southern Africa would also play a role, IHN said in a research paper last week.Joel Hinaunye Eita, researcher at the Namibian Economic Policy Research Unit (Nepru), said the recent fuel price cut, as well as lower inflation figures, boded well for a much-needed fall in the “cost of doing business in Namibia”.These should contribute to a relatively benign inflation outlook for 2004, Eita said.Provided the Namibia dollar, and the rand to which it is pegged, remained stable Namibians could expect a stable or declining inflation rate for much of this year, Eita added.Johannes !Gawaxab, the Chief Executive of Old Mutual Namibia and previous head of their asset management arm, said the Namibian economy is set to grow faster. This would be because of lower interest and inflation rates, global economic recovery, infrastructure spending and strong domestic consumer demand. “Economic growth of 3,5 per cent is expected during 2004 which is an increase of 0,6 per cent over the estimated growth of 2,9 per cent of 2003. The local economy grew by 2,8 per cent in 2002,” !Gawaxab said in a presentation last week. !Gawaxab said key developments expected to affect the local economy and financial markets this year include the strength of the Namibian dollar, state of the world economy and the extent to which Namibia can prove that democracy is rooted – through its handling of the regional and national elections this year. On prospects for 2004, !Gawaxab said the outlook is “reasonably promising”. “If the Namibia dollar remains at current levels, consumers will benefit but exporters and the tourism sector will be adversely affected, whilst the competitiveness of the country will also suffer,” !Gawaxab said. VOLATILE CURRENCY He said he expected a lot of volatility in the Namibian dollar around the 6,70-7,50 to the US dollar level over the next three months. The consensus forecast for the next twelve months, he said, ranges from 6,70 – 8,10 against the US dollar. !Gawaxab said the recent weakening of the local currency was caused by confusion on the South African government’s land policy (a new land bill is being discussed), “sentiment changes with the South African election this year”, the South African Reserve Bank intervening in the Foreign exchange market to buy foreign currency, SA trade figures (in November 2003 the SA trade balance had a deficit of R4 billion), and global “hedge funds” taking profits. However, he said the current depreciation “does not mean we have a new round of serious weakening of the currency” The rand, and thus the Namibian dollar, has come under pressure of late, a local currency trader told The Namibian, with foreign investor jitters ahead of a general election in South Africa likely to weaken the currency slightly in coming weeks. However, one said, these concerns, which centre on possibility the ANC could toughen up the country’s land reform policy, were not really justified at this stage. “The ANC has pursued market-friendly policies since it took power,” said the trader, who asked he not be named. PROSPECTS FOR GROWTH Locally, the Consumer Price Index (CPI) plummeted at the end of December 2003 to its lowest level since independence, namely 2,05 per cent. This is a month-on-month decrease of 1,54 per cent and primarily attributable to a reduction in prices of food, transport, and communication, !Gawaxab explained. Meanwhile, local asset managers Investment House Namibia (IHN) last week forecast an average of only four per cent annual inflation this year. Last year, inflation averaged 7,3 per cent, and was recorded as high as 13 per cent in late 2002, an increase which is widely seen to have slowed growth, as it caused the Reserve Bank to hike interest rates in an effort to keep price rises to a minimum. IHN said inflation may rise slightly in the later part of the year, but was unlikely to go much above six per cent, the upper end of the target the South African Reserve Bank has set for managing the overall level of price increases. It said that the rand would be key in whether Namibian inflation and interest rates remained at a reasonable level. Whether there is renewed drought in southern Africa would also play a role, IHN said in a research paper last week. Joel Hinaunye Eita, researcher
at the Namibian Economic Policy Research Unit (Nepru), said the recent fuel price cut, as well as lower inflation figures, boded well for a much-needed fall in the “cost of doing business in Namibia”. These should contribute to a relatively benign inflation outlook for 2004, Eita said. Provided the Namibia dollar, and the rand to which it is pegged, remained stable Namibians could expect a stable or declining inflation rate for much of this year, Eita added.