Namibia and the world at large are going through quite a scary time as the COVID-19 pandemic takes its toll on everything from our work arrangements to our social lifestyles and most significantly on our economies.
Joining 99FM in a telephonic interview, FNB Group Economist Ruusa Nandago shared valuable insights into the impact of COVID-19 on the Namibian economy and how a global crisis like this affects every Namibian.
What changes COVID-19 has brought about in our economy, how much worse are things because of this global pandemic?
Before I get into what the impact of COVID-19 will be or is already, it’s important to understand that we already started off from a weak position. The economy has already been performing really poorly over the past few months and years, but I also want to make sure because not everyone is an economist, everyone needs to understand what actually drives the economy and it’s actually really simple.
For an economy to grow or thrive, you need four things:
- The first is that you need people like you and I to spend, so going to supermarkets, restaurants and so on, puts money in those establishments which allows them to employ more people, which allows us to put money into other establishments.
- Second, you need firms to invest and to produce as that helps the economy to grow and it also helps them to employ people which again feeds into that consumption cycle.
- Thirdly, you need the Government to spend on things like infrastructure, social spending, essential services and so on but the Government needs tax and corporate income taxes to do that.
- Finally, we need to share it with other countries through exporting and importing and typically for that you need a trading partner to also be doing well from an economic perspective.
If we then look at COVID-19 and its impact, it’s pretty clear that it will impact all four of these components. What’s interesting is that it’s not exactly the actual virus but rather the containment measures and the lockdown measures to curb the virus that are having the impact. So if our movements are restricted, we can’t consume. You can’t go to the cinema or to the restaurants and that means then businesses aren’t getting enough income.
That means they might need to lay off some workers or cut wages and all those dynamics play into the economy. Then of course because other countries that we trade with, China, South Africa, the UK, for example, are not doing well so they don’t demand our goods or our diamonds, for example, we can’t then trade from that perspective.
Our Government then has to spend more on fiscal packages, health spending, etc. and so all those dynamics then play into bringing down an economy that is already weak.
How can we as individuals cope with the movement restrictions that have been put in place?
I think we are cognisant of the fact that not every individual and not every business has the buffers to withstand a shock like this one. That is the reality. But it’s very important for us to keep in mind that we need to try our best to help slow down the spread of the virus because that is the only way that it will then help to support the economy. I think for those who are in a position to do so, it’s very important to be very cognisant of the expenditure, save where you can and if you have a business and you’re in a position to do so, avoid retrenching.
As individuals, we need to take the necessary precautions and adhere to the lockdown measures. I think a lot of it is out of our control but let’s try to focus on the things that we can control where possible.
How about in the future, Is there a possibility that our economy will recover from this?
Because it’s still a developing situation and due to the lack of data available it’s difficult to tell you how long this will go on, how strong the bounce back will be and so on but we do know that economies always recover from shocks. So I think with the necessary measures that the Government has put in, with the Fiscal support that could at least help us when the virus eventually ends, it will help us pick up but it will take a lot of collective effort. There were also some underlying issues that we’ll need to address, but it’s very difficult to say because of the complexity of the whole situation.
But what we do know is that economies always pick up if we put in the effort to try and help the economy.