Covid: The REAL impact on the Namibian economy

14 October 2020 | Banking

Windhoek • Ruusa Nandago

After the first outbreak was reported in December 2019, the World Health Organisation officially characterised Covid-19 as a pandemic on 11 March 2020. This pandemic is a crisis like no other, and there was a substantial degree of uncertainty around its impacts on lives and livelihoods.
Governments across the world essentially had to navigate the crisis with a blindfold on, implementing lockdowns and containment measures of varying degrees without any indication of their effectiveness. The economic and market data that has since been released shows that these measures have had devastating and far reaching effects and have pushed most economies into recession.
The Namibian economy contracted by 11.1% y/y in the second quarter as a result of the pandemic induced lockdown measures – the largest contraction on record. There was major disruption to economic activity as all but three sectors declined during this period, with the Hotels and Restaurants sector the hardest hit.
The slowdown in the economy is also reflected in the labour market, where widespread job losses were reported during the same period as the pandemic dealt a blow to businesses. The second quarter saw 5748 retrenchments being recorded as companies either closed or engaged in right sizing to cut costs at a time were revenue was falling.
As a result of job losses, wage cuts and uncertainty around future income, spending in the economy has taken a hit.
Inflation reached a 15-year low of 1.6% in April where much of the strictest level of lockdown was implemented. While inflation has since increased to 2.4% in August, it remains far below its historical trend. The reason for is that the demand for goods and services by consumers is weak, making it difficult for retailers to pass on price increases to consumers. This stress at the consumer level is reflected in vehicle sales, house prices and wholesale retail trade which have contracted by 26.6%, 2.7% and 22.5% respectively.
The Bank of Namibia has cut the repo rate by a total of 275bps to 3.75% this year as part of its commitment to support the economy. These rates are the lowest they have been since 2001.
Despite these low rates, however, credit extended to the private sector remains low, suggesting that low rates have done little to spur economic activity. The latest private sector credit extension figures show that total credit extended grew by only 2.6% as corporate credit uptake growth remains low at 0.4%, while that of households was recorded at 4.3%.
While lockdown measures across the world have been significantly eased, much uncertainty remains about the future path of the pandemic and the resurgence of its spread.
Given that the Namibian economy entered the Covid-19 period in an already weak position, it will take some time for economies to make up lost ground. Even after the pandemic has been contained the private sector may react by increasing savings and trying to rebuild lost wealth, resulting in a slow recovery of consumption and investment and by implication economic growth.
*Ruusa Nandago is a FirstRand Namibia Economist.

Similar News

 

Another accolade for local bank

3 days ago - 14 January 2021 | Banking

For the second consecutive year, Bank Windhoek has been rank the Best Bank in the country by PSG Namibia’s 2020 Banking Review.The PSG Banking Review...

Financial relief for SMEs

4 days ago - 14 January 2021 | Banking

The Development Bank of Namibia (DBN) will launch business relief loans on 18 January, providing finance equivalent to between 3 and 6 months' working capital...

A round for the motor vehicle industry

1 month - 08 December 2020 | Banking

Dealerships and salespeople in the motor vehicle industry were awarded at Bank Windhoek’s annual Selekt Sales Awards ceremony hosted in Windhoek recently.The awards recognised dealerships...

Big win for local bank

1 month - 08 December 2020 | Banking

Bank Windhoek was named the Best Retail Bank in Namibia by the London-based Global Banking and Finance Review, a leading international financial portal and print...

Avoid overspending this season

1 month - 03 December 2020 | Banking

As the holiday cheer takes hold, we’re bound to be tempted to spend more than we should, but having fun shouldn’t mean overspending. Budgets may...

Be financially savvy this Black Friday

1 month - 26 November 2020 | Banking

With Black Friday tomorrow, it’s important for consumers to exercise caution and self-discipline when managing their money over this period. Lack of financial discipline around...

New campaign ignites patriotism

2 months ago - 27 October 2020 | Banking

Get Local #GoBeyond – this is Bank Windhoek’s new swipe campaign that is aimed at stimulating patriotism in light of the global pandemic challenges.According to...

Cleaner cooking at Omaheke feeding scheme

3 months ago - 13 October 2020 | Banking

FNB Namibia handed over 260 aprons to community members who on a rotational basis volunteer to prepare and serve meals to learners in the Omaheke...

FNB is ‘Best in Namibia’

3 months ago - 08 October 2020 | Banking

Global Finance voted First National Bank (FNB) is the best bank in the country at the magazine’s 27th annual awards for the World’s Best Banks.FNB...

Eiman takes reigns of DBN’s SME Finance

3 months ago - 01 October 2020 | Banking

Seasoned veteran of business finance, Robert Eiman, has taken over the reigns of the Development Bank of Namibia (DBN) SME Finance department.This move follows the...

Latest News

Residents relocated to avoid flooding

2 days ago - 15 January 2021 | Disasters

More than 200 residents of informal settlement in Windhoek were relocated to avoid their shacks being flooded.Speaking to Nampa, some residents said the decision was...

How Covid has changed the...

2 days ago - 15 January 2021 | Life Style

From wearing face masks in public to socialising from two meters apart, society is adapting to the rather unusual circumstances that have been brought about...

Fighting cervical cancer together

2 days ago - 15 January 2021 | Health

Human papillomavirus (HPV) is the most common viral infection of the reproductive tract. Most sexually active women and men will be infected at some point...

Nambob joins the fight to...

3 days ago - 14 January 2021 | Society

With the Cancer Association of Namibia’s (CAN) National Outreach Programme kicking off today, Nambob (previously Avbob Namibia) extended their support to the organisations efforts to...

Covid stats in the spotlight

3 days ago - 14 January 2021 | Health

As the number of Covid-19 cases continues to rise in Namibia, the US Embassy also continues to provide support to the Ministry of Health and...

Another accolade for local bank

3 days ago - 14 January 2021 | Banking

For the second consecutive year, Bank Windhoek has been rank the Best Bank in the country by PSG Namibia’s 2020 Banking Review.The PSG Banking Review...

Support for BAS

3 days ago - 14 January 2021 | Social Issues

The German Embassy in Windhoek continues to support Namibia in the areas of education and sport, especially now during Covid. Amongst others, the embassy has...

Financial relief for SMEs

4 days ago - 14 January 2021 | Banking

The Development Bank of Namibia (DBN) will launch business relief loans on 18 January, providing finance equivalent to between 3 and 6 months' working capital...

Minor amendments to Covid-19 regulations...

4 days ago - 13 January 2021 | Health

The measures announced on 23 December 2020 to control and prevent Covid-19 lapse at midnight tonight, with health minister Dr Kalumbi Shangula saying earlier today...

Load More