Namibia Economic Outlook

  • Growth moderated to 4.4% in 2015 on the back of low global commodity prices and should remain subdued in 2016 as fragile external demand dims the outlook.
  • Political stability and sound macroeconomic management are promoting investor confidence but education and skills must improve to achieve a more competitive and inclusive economy.
  • The public housing programme will need to be complemented with accelerated urban infrastructure development and further strengthening of rural growth centres to create more rural jobs and contain rapid rural to urban migration.

Gross domestic product (GDP) growth moderated to 4.4% in 2015 from 6.4% in 2014 on the back of weak commodity prices and prevailing drought conditions. Growth at 4.2% in 2016 is expected to remain subdued due to weak external demand but should rebound in 2017 as new mines start producing and exporting. Falling Southern Africa Customs Union (SACU) revenues due to a fragile South African economy, inadequate international reserves and a rapid rise in house prices are key risk factors going forward. Tight monetary policy to contain rising credit linked to luxury imports and low global oil prices has reduced inflation, year-on-year, from 5.3% in 2014 to 3.5% in 2015. The repo rate was increased twice in 2015 to reach the current 6.5%. However, further depreciation of the local currency and higher anticipated food prices due to drought are expected to counter the benefits from lower international oil prices and should push inflation to breach the upper end of the South African Reserve Bank (SARB) target range of 3-6%.

Political stability and sound macroeconomic management are promoting investments and sustaining Namibia’s high growth rates. Benefiting from its strong links to South Africa, Namibia attracts more investment than average sub-Saharan countries. However, to accelerate convergence with high-income countries in line with its current National Development Plan, the authorities need to address remaining structural bottlenecks. Having passed a new Public Procurement Law in 2015, work on Public Finance Management law must be speeded up to reinforce economic governance. Fiscal consolidation, including current expenditure prioritisation and public sector wage bill containment, should complement revenue mobilisation measures to improve fiscal and current account balances. Efforts to improve the quality and relevance of education must be stepped up and anti-corruption efforts redoubled to recapture public confidence and strengthen the country’s strong governance record.

Namibia’s rate of urbanisation has accelerated. Growing at 4.5% per year, the urban population as a share of total population increased from 28% in 1991 to 43% in 2011. The rate of urbanisation has been higher than the population growth rate of 3.5%. This has led to mushrooming of informal settlements in the major towns and urban centres. This has largely resulted from low access to serviced land and low incomes among unskilled and semi-skilled immigrants. About 74% of the Namibian households cannot afford conventional housing and only 57% of urban households have access to sanitation facilities, which has serious environmental and health implications. The government’s ongoing public housing programme will need to be completed with better urban infrastructure development programmes and further strengthening of rural growth points to create more rural jobs.