28 Jun 2017 18:40pm
KEETMANSHOOP, 28 JUN (NAMPA) Twilight Capital Consulting Managing Director, Mally Likukela on Wednesday expressed worry that austerity measures could worsen the current recession, urging Government to instead increase spending but more wisely.
The Namibia Statistics Agency last week revealed that the Gross Domestic Product contracted by 2.7 per cent in the first quarter of 2017, compared to 4.1 per cent in the corresponding quarter of 2016.
Likukela, in a media statement, attributed this performance largely to austerity measures which saw a number of capital projects put on hold.
Eventually it sent the construction sector to its knees, taking along the entire economy, he noted.
Likukela said the concern now is no longer the impact of the recession, but the amount of time it will take the economy to recover.
Given the prevailing fiscal consolidation, all eyes are on private consumption to rescue the economy, but there is no chance consumers will soon be able to rescue the economy.
Consumer spending in fact dropped, while the pace of business investment also weakened significantly.
The situation is further compounded by the latest (2016) rise in unemployment to 34 per cent.
Likukela said there is no sign either that the private sector is about to rescue the sinking economy.
Companies are sitting on millions in profits, but will not use this money to create jobs because they dont see increasing demand in their products and services.
He said the only hope for a speedy recovery is for Government to increase spending in the right ways.
Government could have made a terrible mistake switching its attention from jobs and growth to deficit reduction, Likukela said.
He advised Government to increase spending in ways that would avert layoffs, create jobs and put money in the pockets of ordinary people.
The current recession could be longer and deeper on account of austerity measures that depress demand and unless Government stimulates demand, there wont be any demand for private sector products and services.
He feared that more layoffs, especially in the construction sector, could be in the pipeline and that cash-strapped households would continue swimming in massive debt.
Pursuing fiscal consolidation while the economy is weak hurts the economy more and makes the deficit worse and as unemployment rises and corporate profits shrink, so do tax revenues.