- Economic growth is increasing as Namibia enjoys improved international trade conditions, the Bank Of Namibia concludes in its latest quarterly report. Quicker growth has further resulted in lower interest rates and lower inflation, to the advantage of Namibian consumers.
- Overall, the Namibian economy is forecast to grow moderately by 2.9 percent in 2003 compared with 2.3 percent recorded in the 2002 preliminary national accounts, according to Paul Hartmann, Deputy Governor of the Bank. In particular the second quarter of 2003 had contributed to an increased growth rate.
Although a growth rate of 2.9 percent is modest compared to the many African countries experiencing more than 5 percent annual growth, the well-advanced Namibian economy is only moderately comparable to these economies. This is also shown by the Bank Of Namibia's analysis, showing that Namibia's mixed export economy depends on the economic trends in the large markets in the North.
- Available data for the second quarter of the year indicate that the stronger activities in the world economy have positively impacted on the Namibian economy, as overall performance generally improved, the report notes. In particular the positive trends in the US and Japan and the "intensified peace and reconstruction efforts in Iraq" had improved the "international economic outlook."
This improved performance had been most notable in the primary sectors, with the exception of the mining sector, where output was affected adversely by the weak commodity prices. The agricultural sector and the fishing sector - both dependent on exports - had been strengthened. Further, the hotels and restaurants sub-sector also had "contributed to overall economic growth in the second quarter of 2003."
The main impetus to the projected growth of 2.9 percent this year was however an "increased mineral production and better performance of the manufacturing sector," the Bank noted.
The growth in Namibia's export sectors in the second quarter of 2003 further came at a time of a strengthened exchange rate for the Namibian dollar, meaning that Namibian export products had become slightly more expensive abroad.
- Still on the positive side, the Bank Of Namibia comments, "inflation continued its downward trend, supported by ... a strong decline in food price inflation." For August 2003 inflation had stood at 6.7 percent.
The growth in the Namibian economy and the lowered inflation rate also had led to a change in the direction of the Bank's monetary policy. The Bank rate was reduced by 125 basis points to 11.5 percent from 12.75 percent in the previous quarter. In line with this development, commercial banks announced a downward adjustment in their lending rates, effective from July 2003.
The Bank Of Namibia further reduced its Bank rate to 10.75 percent in August and to 9.75 in September. "The easing of monetary policy seems to have stimulated the demand for credit during the second quarter," the Bank noted, referring to a larger amount of bank loans made in the period.
Finally, the Bank Of Namibia warned that the country's commercial banks were undermining society's will to deposit savings and rather provoke credits and consumption. Compared to South African banks, Namibian banks were "slower at adjusting deposit rate when the interest rates environment changes, while the adjustment of lending rates follows almost immediately upon Bank rate adjustments."
- The consequence of this could be low levels of savings mobilisation and, if this persists, low levels of financial intermediation, funds moving away from bank deposits to other savings instruments, reduced investment and the outflow of capital," the Bank Of Namibia warned.
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