The Namibian economy shows signs of recovery following the Covid-19 pandemic as real GDP growth reaches 2.7% in 2021.
The Namibian economy has started to recover following a sharp contraction due to the Covid-19 pandemic. Real GDP growth reached 2.7 percent in 2021 as mining activity rebounded and tertiary sector activities began to recover. The recovery strengthened in HI 2022 on the back of sustained mining growth and stronger manufacturing activity.
This is according to Ms. Giorgia Albertin, International Monetary Fund (IMF) Mission Chief for Namibia, who staged held a virtual mission from 20 September to 5 October to conduct the 2022 Article IV Consultation discussions.
Inflationary pressures rise
Inflationary pressures have risen as higher international oil and food prices, due to the war in Ukraine, were passed through to the domestic economy. Average headline inflation rose to 5.6% in August, reflecting rising food and transport prices.
Real GDP growth is expected at 3% in 2022 and 3.2% in 2023, supported by robust diamond, gold and uranium production, and rebounding tourism. Average inflation will rise to 6.4% in 2022 and start to moderate in 2023. The current account deficit remains large, financed by FDI inflows in oil and gas and one-off transactions. The fiscal deficit is expected to narrow, supported by strengthened tax revenues and fiscal consolidation measures.
“Spillover from the war in Ukraine, a slowdown of the global economy and weaker non-oil commodity prices could further exacerbate inflation, worsen imbalances, and undermine the recovery,” warned the IMF. “Preserving macroeconomic stability, advancing structural reforms and protecting the most vulnerable is key to foster private sector-led and inclusive growth and reduce unemployment and inequality.”
Preserving debt sustainability
Implementing the authorities’ fiscal consolidation strategy is crucial to preserve debt sustainability. Containing the wage bill, advancing the reform of State-owned enterprises and strengthening tax administration is key, highlighted the IMF.
In parallel, it is important to preserve social spending and growth-supporting public investment and mitigate the impact of higher food and fuel prices on the poorest. Strengthening the public financial framework will support fiscal consolidation.
The Central Bank of Namibia has gradually raised its policy rate, following the South African Reserve Bank’s (SARB) monetary policy tightening. As inflationary pressures rise, maintaining the policy rate broadly aligned with the SARB’s rate and an adequate level of reserves will support the currency peg and anchor inflation. Strengthening the resilience of the financial sector and managing macro-financial risks will support financial stability, reports the IMF.
Structural reforms ongoing
“Structural reforms to support economic diversification and enhance productivity are progressing. Improving the business climate, fostering access to finance, strengthening governance and reducing skills mismatches are key to foster growth,” it concludes.
Namibia has recently sought to improve its trade ties with Qatar.