Political stability and sound economic management have helped anchor economic growth and poverty reduction in Namibia. Growth has not been accompanied by job creation, however, and extreme social and economic inequities inherited from apartheid persist despite generous spending on social programs. The country is also vulnerable to short- and long-term environmental shocks as all major sources of growth depend heavily on Namibia’s fragile ecosystem.
With a preliminary estimate of gross domestic product (GDP) growth of 4.5% in 2015, down from 6.4% recorded in 2014, the economy continues to grow faster than the 4.3% long-term trend. Low interest rates, fiscal stimulus, and unusually high foreign direct investment (FDI) in mining have resulted in a construction boom, fast household consumption growth, and solid growth in tradable services.
While strong growth contributed to job creation and poverty reduction, significant macroeconomic imbalances also emerged. Partly reflecting imports for extractive projects, but also driven by fiscal stimulus and private credit growth, the current account deficit reached 14.3% of GDP in 2015. With successive fiscal deficits, debt levels climbed from around 15% of GDP in 2009 to around 36% of GDP in 2015. Consequently, Namibia is now undertaking necessary adjustment amid an unfavorable external environment. Responding to expected declines in SACU receipts, the recent budget statement announced expenditure cuts averaging 1.7% of GDP per year over 2016-2018, bringing the primary deficit down to around 2.6% of GDP by 2018. Such an adjustment is expected to protect medium term GDP growth prospects (4.2% in 2016 and 5.4% in 2017) and debt sustainability. By 2017, public debt should stabilize around 39% of GDP and the fiscal deficit decrease to 4.9% of GDP, down from 6.6% in 2015.
Namibia’s economic growth, prudent macroeconomic policies, and generous social programs have not generated the jobs needed to overcome the inequitable distributions of income and assets or raise living standards in rural areas and among the urban poor. At the top of the government’s agenda is bringing down the very high unemployment rate.
Electricity demand has been growing rapidly, pushed by urbanization and the mining sector. Long-term agreements to purchase electricity at favorable rates are expiring, and there is no significant new generation capacity since independence. Wholesale electricity prices have risen by double-digit rates in each of the past several years.
All major production sectors—mining, tourism, livestock and meat production, and fisheries—are vulnerable to external economic and ecological shocks. Foreign demand in each industry is cyclical, seasonal, or unpredictable, with downstream effects for employment, income, and government revenue. All face risks from climate change and/or other countries’ policies to address climate change.
Last Updated: Apr 12, 2016