By: Staff Writter
The Namibian economy is gradually recovering from the impact of the COVID-19 pandemic, says the International Monetary Fund (IMF) in a press release this week.
The IMF says it has concluded the Article IV consultation with Namibia on December 7. As part of the consultation, an IMF team of economists visited the country to assess economic and financial developments and discuss the country’s economic and financial policies with government and central bank officials. IMF staff missions also often meet with parliamentarians and representatives of business, labor unions, and civil society.
“After a sharp contraction in 2020, real GDP growth reached 2.7 percent in 2021 and the recovery strengthened in the first half of 2022,” IMF says.
It notes that mining activity has rebounded while manufacturing and tertiary sector activities are gradually recovering, adding that inflationary pressures have risen as higher international oil and food prices, due to the repercussions of Russia’s war in Ukraine, were passed through to the domestic economy.
“Real GDP growth is expected at 3 percent in 2022 and 3.2 percent in 2023, supported by robust diamond, gold, and uranium production and a gradual recovery in tourism and manufacturing,” it projects.
“Average inflation would reach about 6 ½ percent in 2022 and start to moderate in 2023”.
The IMF says the current account deficit is expected to remain large in 2022, reflecting higher international food and fuel prices, a sharp decline in SACU receipts and large FDI-financed imports in oil and gas.
However, the IMF expects the fiscal deficit to narrow in FY22/23, supported by fiscal consolidation measures to mobilise additional revenues and increase spending efficiency. “Deteriorating global conditions could adversely impact Namibia’s short-term outlook and worsen external and fiscal imbalances,” it warns.
While noting that Namibia is expected to continue its gradual recovery, the Fund directors highlighted the risks from deteriorating global economic conditions. They called for continued orientation of macroeconomic policies toward preserving macroeconomic stability, while fostering inclusive growth to reduce high unemployment and inequality.
The IMF directors welcomed the continued progress on medium-term fiscal consolidation and the adoption of measures to protect the most vulnerable from higher food and fuel prices and food insecurity.
They stressed that the planned fiscal adjustment measures are pivotal to preserve debt sustainability and strengthen the external position.
The directors further underscored the need to advance planned measures to contain the wage bill, enhance tax collection and enforcement, reform state-owned enterprises, and strengthen public financial management.
The Fund called for strong governance and management of the new sovereign wealth fund to mitigate related risks and generally supported delaying its operationalisation until public debt declines and reserves strengthen.
The IMF directors highlighted that maintaining the policy rate broadly aligned with the South African Reserve Bank’s rate and preserving adequate reserves is important to anchor inflation and preserve the currency peg. They encouraged further efforts to strengthen financial sector resilience and mitigate macro-financial risks.
While welcoming the progress on implementing the 2018 FSSA recommendations, the Fund emphasised the need to expand macro-prudential tools and operationalise the central bank’s emergency lending assistance. It called for swift implementation of the action plan to strengthen the AML/CFT framework.
The Fund stressed the need to enhance inclusive growth by advancing structural reforms to foster diversification and increase productivity.
Noting the importance of supporting private sector-led growth and job creation, the Fund recommended taking steps to improve the business environment and increase access to finance and continuing to strengthen governance.
It also called for strong efforts to address food insecurity, including through measures to strengthen climate resilience in the agricultural sector.
