Pace of recovery not in the BoN’s control
PHILLEPUS UUSIKU
The pace of economic recovery will depend on factors outside the central bank’s control such as improved sovereign debt sustainability, structural reforms, accelerating growth and recovery strategy as well as strong private sector, domestic and foreign investments and risk taking.
By doing so, Namibia will be able to overcome supply-side constraints, improve productivity, boost growth and create employment opportunities.
These remarks were made by the governor of the Bank of Namibia (BoN), Johannes !Gawaxab, yesterday at a seminar held under the theme “Mapping Namibia’s Post-Covid Economic Recovery.”
!Gawaxab noted that the central bank stands ready to provide support to the economy, ostensibly within the scope of its mandate in order to place the Namibian economy on a sound and sustainable growth path.
The core mandate of the bank which is ensuring price and financial stability are important for maintaining purchasing power, containing the costs of living and of doing business, and supporting Namibia’s competitiveness while creating certainty and confidence.
Nevertheless, improving the potential growth rate of the economy should be a collective effort both from the public and private sectors. Monetary stimulus alone cannot engineer healthy, durable growth, he pointed out.
Apart from the need to address electricity and digital infrastructure, urgent attention has to be given to creating policy certainty, ensuring professional service delivery and diligent execution of policy, and addressing accountability issues, !Gawaxab said.
POSITIVES
The green hydrogen initiative is progressing significantly. “Our ports infrastructure has already been upgraded so that a virtual doubling of traffic can be handled, catapulting Namibia’s role as a logistics hub,” he said.
The recent oil find at sea has stirred considerable excitement. A number of mining and manufacturing projects are underway or in the pipeline. In the past three years the mining sector alone invested N$14.1 billion or 7.2% of gross domestic product (GDP). The cumulative investments by the mining sector in the economy is estimated at N$20.6 billion worth of investments equivalent to 10.5% of 2022 (GDP). Furthermore, research work in collaboration with the Harvard Growth Lab on diversifying the economy and raise our growth rate is progressing well and specific sectors have been identified and linkages with markets proposed.
The tourism sector stands ready to capitalise on further lifting of pandemic-related restrictions and normalisation of visitor numbers. And in the meantime, the national spirit has been lifted by the widespread rains that have fallen across Namibia, transforming many frowns into smiles and bringing the promise of higher production in this very decentralised sector that employs 170 000 Namibians, !Gawaxab pointed out.
NEGATIVES
Despite the generally accommodative monetary policy environment, the central bank is worried about weak credit uptake and activity.
The bank recently increased the repo rate by 25 basis points(bps), which is likely to worsen the already subdued credit uptake, however, the decision was taken to curb further capital outflow from the domestic economy. Money will always go where it is well treated and earns higher interest.
Given Namibia’s membership of the Common Monetary Area (MCA) and the one-to-one currency peg, the Bank of Namibia’s monetary policy stance is usually broadly aligned with that of the South African Reserve Bank (SARB). During the course of 2021 the policy environment changed significantly with inflation rising ominously, the governor said.
The SARB increased its policy interest rate in November 2021, but the BoN, despite the possibly of capital flight, felt that it was too early to raise interest rates as the economy was still struggling to recover and the initial position since August 2020 was one of a marginally higher repo rate in Namibia than in South Africa.
This meant that Namibia’s repo rate was maintained at 3.75% while that of South Africa was raised from 3.50% to 3.75% last November. However, in January SARB further increased their repo rate yet again with 25 basis points to 4.00%. This, therefore, for all intents and purposes, necessitated the Bank to increase the repo rate to 4.00% at the first monetary policy committee (MPC) meeting of 2022, he [email protected]
The pace of economic recovery will depend on factors outside the central bank’s control such as improved sovereign debt sustainability, structural reforms, accelerating growth and recovery strategy as well as strong private sector, domestic and foreign investments and risk taking.
By doing so, Namibia will be able to overcome supply-side constraints, improve productivity, boost growth and create employment opportunities.
These remarks were made by the governor of the Bank of Namibia (BoN), Johannes !Gawaxab, yesterday at a seminar held under the theme “Mapping Namibia’s Post-Covid Economic Recovery.”
!Gawaxab noted that the central bank stands ready to provide support to the economy, ostensibly within the scope of its mandate in order to place the Namibian economy on a sound and sustainable growth path.
The core mandate of the bank which is ensuring price and financial stability are important for maintaining purchasing power, containing the costs of living and of doing business, and supporting Namibia’s competitiveness while creating certainty and confidence.
Nevertheless, improving the potential growth rate of the economy should be a collective effort both from the public and private sectors. Monetary stimulus alone cannot engineer healthy, durable growth, he pointed out.
Apart from the need to address electricity and digital infrastructure, urgent attention has to be given to creating policy certainty, ensuring professional service delivery and diligent execution of policy, and addressing accountability issues, !Gawaxab said.
POSITIVES
The green hydrogen initiative is progressing significantly. “Our ports infrastructure has already been upgraded so that a virtual doubling of traffic can be handled, catapulting Namibia’s role as a logistics hub,” he said.
The recent oil find at sea has stirred considerable excitement. A number of mining and manufacturing projects are underway or in the pipeline. In the past three years the mining sector alone invested N$14.1 billion or 7.2% of gross domestic product (GDP). The cumulative investments by the mining sector in the economy is estimated at N$20.6 billion worth of investments equivalent to 10.5% of 2022 (GDP). Furthermore, research work in collaboration with the Harvard Growth Lab on diversifying the economy and raise our growth rate is progressing well and specific sectors have been identified and linkages with markets proposed.
The tourism sector stands ready to capitalise on further lifting of pandemic-related restrictions and normalisation of visitor numbers. And in the meantime, the national spirit has been lifted by the widespread rains that have fallen across Namibia, transforming many frowns into smiles and bringing the promise of higher production in this very decentralised sector that employs 170 000 Namibians, !Gawaxab pointed out.
NEGATIVES
Despite the generally accommodative monetary policy environment, the central bank is worried about weak credit uptake and activity.
The bank recently increased the repo rate by 25 basis points(bps), which is likely to worsen the already subdued credit uptake, however, the decision was taken to curb further capital outflow from the domestic economy. Money will always go where it is well treated and earns higher interest.
Given Namibia’s membership of the Common Monetary Area (MCA) and the one-to-one currency peg, the Bank of Namibia’s monetary policy stance is usually broadly aligned with that of the South African Reserve Bank (SARB). During the course of 2021 the policy environment changed significantly with inflation rising ominously, the governor said.
The SARB increased its policy interest rate in November 2021, but the BoN, despite the possibly of capital flight, felt that it was too early to raise interest rates as the economy was still struggling to recover and the initial position since August 2020 was one of a marginally higher repo rate in Namibia than in South Africa.
This meant that Namibia’s repo rate was maintained at 3.75% while that of South Africa was raised from 3.50% to 3.75% last November. However, in January SARB further increased their repo rate yet again with 25 basis points to 4.00%. This, therefore, for all intents and purposes, necessitated the Bank to increase the repo rate to 4.00% at the first monetary policy committee (MPC) meeting of 2022, he [email protected]
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