By Alois Vinga
IH Securities has projected a choppy economic situation for the country in the year ahead on the back of a poor agricultural season and waning commodity prices on the global market.
The financial services firm says the traditional backbones of the country’s economy are under severe threat due to both internal and external factors beyond its control.
“The outlook looks choppy with aggregate growth weighed down by the anticipated impact of the El Nino phenomenon on the agricultural sector. Agricultural contribution to GDP is expected to decrease to a four-year low of 11,6%, with an anticipated decline of 4,9% in the sector.
“Falling international commodity prices will also dampen growth prospects for the resource-intensive country with a 1% shock in global prices expected to affect exports by between 0, 55% and 0,7% as per Treasury,” said IH Securities.
As a result, growth for 2024 is primed at 3,5%, making it the third consecutive year of economic slowdown. The organ said the attainment of any growth projected by authorities largely hinges on sustained exchange rate stability and fiscal discipline.
The firm said the operating environment in 2024 will likely continue to be rough terrain for businesses.
However, the strategic reserve levies for diesel and petrol were increased by US$0.03/L and US$0.05/L respectively, which might negate a portion of the gains from a slowdown in global energy prices.
The country’s pump prices are notably already among the highest in the region, thereby increasing the cost of mitigating power shortages for local businesses. Power costs off the national grid have also seen an increase in real terms from USc2.3/ kWh in 2020 to USc10/kWh.
“Furthermore, the manufacturing sector is expected to slow down on account of constrained inputs from a subpar agricultural season, and a credit crunch.
“Nevertheless, expected improvements in electricity supply and continued investments are expected to aid capacity utilization in the manufacturing sector to 60% in 2024 from 56.8% in 2023,” the financial services firm added.