In the year 2015 we expect strong domestic demand and accelerating investment in the mining sector which will see economic growth in Namibia average a respectable 4.5% annually over the next five years. Over the near term, export performance will continue to be weighed down by weak global demand and soft commodity prices. Growth will be driven in the main by capital intensive investment projects in the mining and infrastructure space especially construction, while key exports such as diamonds and uranium will benefit from gradually improving demand conditions in key markets.
Growth will be driven in the main by capital intensive investment projects in the mining and infrastructure space, while key exports such as diamonds and uranium will benefit from gradually improving demand conditions in key markets.
The landslide victory for president-elect Hage Geingob and the ruling SWAPO in Namibia’s general elections on November 28 augurs for broad political stability and a pro-business economic agenda. The result means that SWAPO will expand on its two thirds majority in the national assembly. Hopes for a shift towards a more inclusive electoral landscape continue to prove elusive.
Stability is more likely to prevail over the coming decade mainly because of the predictability of the government. While Namibia’s enormous income inequality poses some risks to political stability, we believe the population is likely to continue supporting the SWAPO government for the next 10 years, ensuring broad political stability, and continuity. However, a lot need to be done from a government level to level ground to all citizens. For inequality to go we expect projects to be fairly distributed so that a lot benefit and make money.
Renewed global economic uncertainty, a benign inflation outlook, and the Bank of Namibia’s (BoN) close adherence to monetary policy in neighbouring South Africa will see Namibia’s benchmark interest kept steady at 6.00% through 2015.
Namibia’s fiscal balance will deteriorate modestly through FY2014/15 to reach the equivalent of 4.3% of GDP. An expansionary budget and election-related pressures will keep spending high, while we are less optimistic than the authorities are in our outlook for the economy, and by extension revenue generation, over the coming quarters.
Namibia’s current account deficit will narrow to around 4.5% of GDP in 2015 from an estimated 6.4% in 2014. Namibia will sustain a sizeable current account deficit in the range of 4.0-5.0% of GDP over the next five years, due to a structural dependence on capital and consumer goods imports. Over the next five years, we expect the country to sustain a sizeable current account shortfall of between 4.0% and 5.0% of GDP, due to a structural trade in goods deficit.
Key risk to Outlook:
Namibia’s small, open economy is highly exposed to events on the world stage. While we have incorporated the ongoing global malaise into our economic forecasts, if the situation abroad deteriorates (or, conversely, improves) more than we anticipate, we would have to adjust our forecasts accordingly.
Much of the economy remains closely tied to agriculture, and weather poses substantial risks, as illustrated by the ongoing drought, which has threatened yields and food security. Changing weather conditions pose both upside and downside risks to a number of our forecasts, including for growth, inflation, and trade.
Our broad outlook for Namibia’s current account over the next few years remains relatively unchanged. We maintain that the country will sustain a sizeable current account shortfall over our 2014-2018 forecast period as demand for imports associated with new mining projects more than offsets a sluggish recovery in demand for key mineral exports.
Thanks to the country’s strong primary sector, we expect growth to prove relatively robust in the long run, averaging around 4.5 % annually over 2014 to 2023. With a stable political environment, the main risks are the limited size of the domestic market, rising income inequality and global demand for the country’s primary exports.