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Namibia – Trade deficit narrower, economic growth lower

The Namibia Statistics Agency (NSA) released its latest monthly Trade Statistics Bulletin on June 12. The NSA recorded a trade deficit of N$2.179bn for the month of April, reflecting a decrease of 46.8% m-o-m from the deficit recorded during March – revised up from N$2.468bn to N$4.098bn. Although both exports and imports decreased during April, the latter declined proportionately more, hence the narrower trade deficit. The decline in imports reflected weaker domestic demand particularly for boilers and vehicles.

The NSA also recently released its quarterly Gross Domestic Product (GDP) report. The statistics suggest the desert economy’s real GDP growth reached 1.6% y-o-y in 2014 Q1, down from 4.9% y-o-y recorded in 2013 Q4. On a quarter-to-quarter basis the Namibian economy continued to contract, albeit at a slower rate, from a reading of -2.5% q-o-q in 2013 Q4 to -2% q-o-q in 2014 Q1. Nonetheless, based on the generally accepted definition, this suggests the economy has entered a recession.

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At the moment, we are not too alarmed about the fact that the desert economy seemingly entered a recession, especially as the country’s economic statistics often prove fairly volatile from one quarter to the next. Nonetheless, the most recent GDP figures are certainly cause for concern, especially in relation to the country’s primary industries which, for the most part, continued to reflect particularly poor performance. The agricultural industry contracted by 18.9% y-o-y in 2014 Q1, while the fishing and mining industries also recorded negative growth equal to 13.1% y-o-y and 3.8% y-o-y, respectively. On a more positive note, the construction and wholesale & retail trade industries performed well and expanded by 22% y-o-y and 20.1% y-o-y, respectively.

WHY DO WE CARE? Despite the most recent GDP statistics, we maintain our view that the economy will record average real GDP growth in the range of 4%-5% this year. The construction sector will remain one of the key growth drivers, buoyed by construction requirements associated with several large-scale infrastructural initiatives. Also, the recovery in the agricultural sector – after the severe drought last year – could start gaining traction during 2014 H2. Furthermore, despite the fact that inflation increased to 6.1% y-o-y in May, we believe the economy’s poor growth performance during 2014 Q1 could serve as an incentive for the Bank of Namibia’s Monetary Policy Committee (MPC) to maintain the interest rate when it meets on June 18.

Analyst: Cobus de Hart

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