Recession clouds to clear in 2010

INVESTMENT House Namibia (IHN) has joined the growing ranks of local economists predicting that the country will spiral into negative economic growth this year.

According to their Daily Market Analysis, IHN now expects the gross domestic product (GDP) to grow by minus 0,4 per cent in 2009.Their forecast follows that of Old Mutual Group Economist Robin Sherbourne’s warning last week that Namibia is likely to plunge into recession this year, with economic growth expected to tumble to minus 1,6 per cent. Dr Omu Kakujaha-Matundu, Deputy Dean of Economics and Management at the University of Namibia (Unam), shares this bleak prediction.’I think we are almost there or we are in recession already,’ Dr Kakujaha-Matundu told The Namibian.Recession concerns grew last week amidst Bank of Namibia (BoN) Governor Tom Alweendo lowering the official 2009 growth forecast for Namibia from 1,1 per cent to 0,4 per cent. BoN Director of Research Dr John Steytler at the same time warned that the new figure only contains the drastic fall in diamond production, but doesn’t take into consideration the slump in tourism of which the BoN is already aware. Growth prediction will therefore probably have to be adjusted once again later in the year, ‘even for the worse,’ Dr Steytler added.The good news, so far, is that the experts think Namibia’s economic struggle should ease up next year.Sherbourne forecasts economic growth of 4,2 per cent next year, followed by 7,4 per cent in 2011 and 4,7 per cent the year after.Alex Sienaert, research analyst for Africa at Standard Chartered Bank in the United Kingdom, expects a three per cent-growth in GDP in 2010. This should increase to 4,5 per cent in 2011, where growth is likely to remain for two years.Jan Duvenhage, Standard Bank South Africa’s research expert for Namibia, is only willing to stick his neck out as far as next year, when he expects the local economy to grow by 3,2 per cent.The rosier growth outlook is accompanied by more favourable forecasts for inflation, interest rates and exchange rates.Inflation is expected to fall to an average of 8,7 per cent this year, Duvenhage predicts, with a further decrease to eight per cent in 2010.’Thereafter prices could drop further to seven per cent by 2013,’ he says.This is slightly higher than expected inflation figures for South Africa, where rates of 5,9 per cent and 5,7 per cent are anticipated for 2009 and 2010 respectively.’Our forecast for Namibia’s Consumer Price Index (CPI) is somewhat higher than South Africa’s because we believe that businesses have more pricing power in Namibia than in South Africa. Prices therefore tend to be sticky downwards,’ according to Duvenhage.Standard Chartered Bank’s view on the grip of inflation on the Namibian consumer differs considerably. For this year, Sienaert predicts an average inflation rate of six per cent. However, he then expects inflation to start its upward curve once again, averaging at 6,5 per cent in 2010 and seven per cent in 2011 and 2012.Interest rates are bound to keep dropping for the next three years, Standard Bank South Africa believes.Duvenhage foresees a total decrease of 250 basis points this year, resulting in a average prime lending rate of 12,3 per cent for 2009. This should drop to 12 per cent next year, followed by a further drop to 11,5 per cent in 2011, where he expects prime to settle for quite some time.’As with other economies, the growth objective is expected to outweigh the price stability aim as global growth slows and commodity prices slump,’ he motivates his prediction.Although not venturing any forecasts, Standard Chartered Bank also expects ‘aggressive monetary easing’ by the BoN this year as slowing demand, as well as lower global food and fuel prices reduce inflationary pressures.’The rand is the wild-card: a sharp depreciation would import inflation, limit the South African Reserve Bank’s easing, and also constrain the BoN’s hand,’ Sienaert explains.He expects the rand/Namibia dollar to trade in the range of nine to ten US dollars throughout 2009, with a strengthening bias setting in by next year.Standard Bank South Africa also predicts the exchange rate to weaken to an average of N$10 to US$1 this year.’However, the currency is expected to strengthen to N$8,82 to US$1 in 2010 and to N$8,20 to US$1 in 2011. The stronger dollar/rand is largely based on expectations of a weaker US dollar over the next two years, as the US economy is facing a major economic crisis,’ Duvenhage believes.In his view the stronger currency in 2010 and 2011 will not favour export earnings and could therefore contribute to sluggish economic growth.jo-mare@namibian.com.na