Economic growth affected by drought

24 Sep 2013 12:00
WINDHOEK, 24 SEP (NAMPA) - The domestic economy is expected to moderate to 4.7 per cent in 2013 compared to 5.0 per cent in 2012, the Bank of Namibia (BoN)’s Assistant Governor Michael Mukete said on Monday.
Mukete attributed the slowdown mainly to the prevailing severe drought affecting the primary sector. For the first half of 2013, inflation stood at 6.3 per cent, lower than the Consumer Price Index (CPI) rate of 6.6 per cent for the last half of 2012, he indicated.
“The output and inflation mix in Namibia remained broadly favourable for 2013,” he said.
He was speaking in the capital during the launch of the BoN's bi-annual Financial Stability Report (FSR) of September 2013.
Meanwhile, Mukete indicated that since the review in March 2013, domestic commercial banking institutions remain sound, profitable and adequately capitalised.
He however said some structural patterns of the balance sheets require monitoring.
“The banking institutions’ assets are highly concentrated in long term mortgage loans, and as such the situation needs continuous monitoring in light of the high level of household indebtedness,” he said.
He also noted that household indebtedness stabilised although the level remains high by regional and international standards.
“This stabilisation is mainly due to improved household disposable income levels. The main risk in this sector emanates from the debt servicing ratio which remains high, despite the historically low interest rates environment. Going forward, household debt levels warrant monitoring,” he warned.
The Assistant Governor further indicated that the corporate debt to Gross Domestic Product (GDP) ratio has increased from 41 per cent at the end of 2012, to an estimated 45 per cent at the end of the second quarter of 2013.
This increase was on account of strong growth in foreign debt, partly attributed to new borrowing and ongoing Namibia Dollar weakness against major currencies.
The increase in overall levels of debt (particularly foreign debt) warrant monitoring, Mukete added.
He however explained that foreign debt is used by export-oriented corporate which earn foreign exchange, which is crucial for external debt servicing.
“The current overall levels of debt may not pose a major problem to the financial stability of the country in the medium term,” he stated.
The Financial Stability Report is essentially an update to the previous report, which was issued in March 2013.
The report uses available economic and financial data to assess the stability and resilience of the Namibian financial sector to internal and external shocks.