Wednesday , May 22 2024
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Strong mining production to spur economic growth

International Monetary Fund’s (IMF) latest focus on the local economy anticipates the gradually recover with real GDP projected to contract this year and turn positive in 2019.

Geremia Palomba, IMF official said the anticipated turn will be supported by strong mining production and a rebound in construction activities.

“Growth is expected to strengthen over time, and converge to a long-term rate of about three percent, below the average of recent years, held back by low productivity growth and stagnant competitiveness,” said Palomba.

He said the downside risks to this outlook include lower than expected revenue from the Southern Africa Customs Union (SACU), slower growth recovery, and fiscal slippages that could undermine policy credibility and debt sustainability.

“Namibia’s key challenges are to continue implementing fiscal consolidation plans to contain public debt dynamics and preserve macroeconomic stability, and pursing reforms to raise productivity, long-term growth, and job creation.”

IMF said in preparation of next year budget, the strategic policy decisions and specific measures to deliver the planned adjustment should be clearly identified. And policies should address the sources of recent deterioration, particularly public wage costs and transfers to public entities.

“Moreover, they should combine expenditure and revenue measures to contain the short-term impact on growth, while safeguarding critical social and capital spending.”

He said there is significant room to undertake supply-side reforms to strengthen productivity and potential growth, and support job creation, in parallel with fiscal adjustment policies, “As the government adjusts, special emphasis should be placed on strengthening the market operations of key public enterprises to improve the efficiency of the economy, and on establishing a well-structured wage policy for the public sector to better align wage dynamics with productivity growth.”

IMF said over time, it is important to remove obstacles to exports, reduce market barriers, and streamline business regulations that contribute to high business costs, while addressing the shortage of skilled workers.

“The financial sector remains sound, although economic slowdown has started affecting it.

“The authorities are taking steps to curb possible risks and advance key reforms, such as strengthening bank’s asset classification, and upgrading the non-bank regulatory and supervisory frameworks.”

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