Namibia’s current account deteriorating
15 January 2021 | Economics
A recovery in imports following the easing of local and global Covid-19 restrictions, as well as a bounce-back in oil prices together with a broadly weak export performance, erased part of the significant current account surplus print in the second quarter of 2020.
Looking at merchandise trade, the goods balance recorded a deficit in the third quarter of 2020, slightly narrower than the deficit during the third quarter of 2019, according to Eloise du Plessis, head of research at PSG Namibia.
This was mainly due to the import bill declining more than the decrease in export receipts during this period. The value of merchandise imports declined by 24% year-on-year reflecting lower demand for all import categories, she said.
The sharpest declines were recorded for fuels -40%, vehicles, aircraft & vessels -33%, and consumer goods -19% year-on-year.
Furthermore, diamonds declined by - 61%, manufactured goods -38%, and food and live animals -28% year-on-year fell the most. On the bright side, the value of gold export earnings rose on an annual basis on the back of a higher gold price, she pointed out.
Namibia continues to source most of its goods imports from South Africa 62.9%, followed by China 6.9% and the eurozone 6.1%. The country mainly imports fuel and consumer goods from South Africa and machinery from China.
Namibia’s leading export partners were China 30.5%, South Africa 26.5%, and the eurozone 17.5%. The share of exports to China nearly tripled over the past year, reflecting an increase in exports of uranium and zinc concentrate. Exports to South Africa were mainly gold and live animals, she pointed out.
The possibility of prolonged travel restrictions amid new waves of Covid-19 infections despite the roll-out of vaccines, which would weigh on travel and transport services, as well as the possibility of continued weak demand for luxury goods are major downside risks to the current account balance in the near term.
Furthermore, the expected loss in revenues from SACU transfers, diamond exports, and services would also give rise to further debt financing by the government, which could reduce the country’s credit worthiness, she said.