By Charmaine Ngatjiheue for The Villager
The state current account deficit has improved by N$700 million from N$3.6 billion in the third quarter last year to N$2.9 billion in the current quarter.
The deficit indicates that the local economy is not as healthy as it is supposed to be. According to previous statistics, Namibian consumers have a growing appetite, which results in the economy hosting more imports than exports.
Central Bank’s Deputy Governor, Ebson Uanguta said the fact that it (current account deficit) decreased in the period under review compared to the year before means the country is doing well in terms of trying to curb the widening gap.
“Yes, we acknowledge that there is a deficit and that the country imports more than it exports but it is commendable that the current account figure decreased from the previous year during the period under review. This means we are doing better,” Uanguta said.
He added that about 70% of the country’s imports come from South Africa whilst about 25% of the country’s exports also go to that country.
“The high import bill, particularly from the importation of unproductive luxury goods and the continued pressure it exerts on the country’s international reserves remains a concern,” he added.
The Namibia Statistics Agency (NSA) second quarter GDP statistics endorsed Uanguta’s sentiments and cited that South Africa continues to be the country’s largest trading partner.
NSA noted that the widening deficit continues to underscore Namibia’s dependence on imports, and her vulnerability to any slowdown in supply from her largest trading partner, South Africa.
However, the country’s main imports in the second quarter were recorded from South Africa, China, India, Switzerland and Botswana, these represented 82% of total imports up from 48% in the same period last year.
During the second quarter, the country recorded a trade deficit widening of N$9.9b from the revised deficit of N$6.9b in the first quarter of this year.
The NSA attributed the widening trade deficit to the excessive importation of goods and services and the weakening rand in the period under review. This is due to the Namibian Dollar being pegged to the Rand.
Namibia’s overall imports stood at N$23.8b, which was a decline of which the NSA cited that the decline in the overall import bill revealed dwindling domestic demand for commodities largely supplied by DRC, Germany and the USA. The main declines were from Germany which fell by 64.8% and the USA by 46%.
Meanwhile exports amounted to N$13.9b, a decrease of N$8.8b compared to N$22.7b recorded in the prior year. In addition, Uanguta last week also announced that the repo rate was maintained at 6.5% as the Instalment Credit to households was moderate. It was also maintained to continue assisting the local economy.
Uanguta noted that despite the recent moderation in instalment credit extended to households, a large amount of these loans is to fund unproductive luxury items, thus exerting additional pressure on the country’s international reserves.
“Although still high, instalment credit extended to households slowed from a peak of 23.5% in February 2015 to 16.4% in August. The Monitory Policy Committee (MPC) welcomes this development and will continue monitoring it closely,” he said.
At present, the level of international reserves stands at N$13b, which remains sufficient to sustain the one-to-one link of the Namibian Dollar to the South African Rand, being 3.3 times higher than the currency in circulation.
The domestic economy saw an improvement during the first eight months of the year, which was largely due to robust construction activities in both the public and private sectors. Meanwhile the transport and communication sector also performed well in the period under review.
Uanguta however mentioned that the mining sector recorded a slower growth during the period under review in comparison to the same period the previous year.
“Risks to domestic growth remain the slower growth of the country’s trading partners such as China, soft commodity prices and prevailing. Domestic demand as reflected in the annual growth in Private Sector Credit (PSCE) remains robust, above 15% over the first eight months of 2015, mainly on account of credit extended to the household sector slowed,” Uanguta cited.