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.
The Namibian
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