Domestic growth expected to improve in 2022
Rising food and energy prices are expected to cloud the prospects for a stronger recovery in the growth of the national economy.
This risks exacerbating unemployment, poverty and inequality in the country. Meanwhile, mounting inflationary pressures on the domestic cost of living are a major concern for the most vulnerable members of society, especially as they are disproportionately affected by unwavering increases in commodity prices. .
This was the stark reality shared by Bank of Namibia Governor Johannes !Gawaxab late last week in his presentation on the state of the economy to CEOs of state-owned enterprises. The 7th Annual General Meeting of the SOE Business Leaders Forum was held in Oranjemund, //Kharas Region.
Despite the escalation of risks for the national economy! Gawaxab said the bank continues to forecast positive growth in 2022, fueled by mining exploration, diamond production, agriculture, forestry and fishing.
“Despite challenges such as water supply constraints and rising input costs, the uranium mining sector is expected to grow at a healthy pace in 2023. Finally, growth in metal ores will be supported by increased production from the gold sub-sector, which accounts for the majority of metal ores,” !Gawaxab said.
Meanwhile, domestically, inflation has already started to rise and is expected to rise further for the rest of 2022, mainly due to high international crude oil and food prices.
!Gawaxab explained that through its monetary policy, one of the main mandates of the Bank of Namibia is to contain inflation and ensure sustainable development. To protect the peg of the exchange rate to the rand and begin to normalize interest rates, the monetary policy committee raised the Repo rate by 25 basis points in February 2022 and another 25 basis points in April 2022.
The Governor indicated that this should continue in order to protect the peg and prevent the flight of capital to other member states of the Common Monetary Area (CMA).
During his presentation, !Gawaxab said that the war in Ukraine is a watershed moment in history that reshapes geopolitical developments, and as a result, many countries, including Namibia, are facing serious headwinds and downside risks through various channels.
The governor explained that four major developments dominate the global and national economies: the Russian-Ukrainian war, a global increase in interest rates, the re-emergence of Covid-19 and the threat of another global economic downturn. In this regard, the IMF revised down global growth for 2022 from 4.3% to 3.6% in April this year, largely due to war and supply chain disruptions.
The presentation also covered financial stability in Namibia, exemplified by the performance of the banking sector, citing an adequate capital position in 2021 and early 2022 despite a challenging economic environment.
In this regard, the modification of the Determination on the policy changes of the relief measures extended to SMEs has been extended until April 2023. The extension was prompted by the challenges that continue to be encountered due to Covid- 19.
!Gawaxab said that to accelerate economic recovery, Namibia must accelerate the adoption of the Covid-19 vaccine to achieve collective resilience amid the winter season.
Regarding the country’s economic recovery strategy, he emphasizes attracting much-needed foreign direct investment which he said should be accompanied by appropriate policies to create a business-friendly environment.
!Gawaxab also called for the implementation of the diversification plan drawn up by the Harvard Growth Lab, the Ministry of Finance and the National Planning Commission in key economic sectors.
Finally, !Gawaxab said that despite significant global and national challenges, Namibians should remain optimistic and capitalize on the opportunities presented by the country’s abundant natural resource endowment (green hydrogen, oil, gold, uranium, etc.). .), which he believes will ultimately increase the country’s growth.