Namibia is a small country of about 2.5 million people, with a long coastline on the South Atlantic, bordering South Africa, Botswana, Zambia and Angola. It is the driest country in Sub-Saharan Africa, and is rich in mineral resources, including diamonds and uranium.
Political stability and sound economic management have helped anchor poverty reduction and allowed Namibia to become an upper-middle income country. However, socio-economic inequalities inherited from the past apartheid system remain extremely high and structural constraints to growth have hampered job creation.
Economic Outlook
After experiencing average annual growth of 4.4% between 1991 and 2015, Namibia’s economy fell into recession in 2016 and has since struggled to recover. Namibia is largely dependent on investments in mineral extraction and government spending, and has suffered from falling commodity prices, weak growth in key trade partners (Angola, South Africa) and tight fiscal policy on the back of government’s effort to rebalance public finances.
The COVID-19 (coronavirus) pandemic is set to have an unprecedented impact on Namibia’s economy and has exacerbated preexisting structural challenges. Real gross domestic product (GDP) contracted by 7.4%t year-on-year (y-o-y) over Q1-Q3 2020. The mining sector, which is an important earner of foreign exchange, contracted by 12.2% y-o-y affected by domestic factors and falling global demand (especially diamonds). On the back of local and foreign travel restrictions, the hospitality industry recorded a large contraction of 46.5% y-o-y. Overall, GDP is expected to have contracted by 7.3% in 2020. Going forward, the growth outlook is subject to significant uncertainty given the unknown profile of the pandemic and likelihood of further restrictions in activity if additional infections waves materialize. Structural policy reforms will be required to raise Namibia’s growth potential.
With an increase of 200,000 in 2020, the number of poor people measured by the upper middle-income poverty line ($5.5/person/day in 2011 Purchasing Power Parity terms) has reached a record-high of 1.6 million. The pandemic mostly affected already vulnerable people, which threatens to widen social gaps further and increase already extremely high inequality.
Development Challenges
Since its independence in 1990, Namibia had achieved notable progress in reducing poverty, halving the proportion of Namibians living below the national poverty line to 28.7% in 2009-10 and to 17.4% by 2015-16.
However, in part due to the negative impact of COVID-19 on livelihoods, poverty rates are projected to increase in the near to medium term, with the upper middle-income poverty rate projected to stay around 64% until 2022. Typically, female-headed households, the less educated, larger families, children and the elderly, and laborers in subsistence farming, are particularly prone to poverty.
Severe drought conditions experienced in 2019 constrained agricultural output and led to a sharp decline in harvests. The reduction in precipitation also affected the broader economy through lower electricity and water generation, with repercussions on industrial production. These developments, along with lower diamond and mineral production due to reduced global demand and falling prices, in a context of much-needed fiscal consolidation, have created challenging conditions for growth.
Progress toward reducing inequality has been slow and as a result, Namibia remains one of the most unequal countries in the world. The consumption Gini index declined from 64.6 in 1993/94 to 60.1 in 2004; to 59.5 in 2010, and further to 57.6 in 2015.
Namibia’s past steady economic growth has not been enough to deal with the country’s triple challenge of high poverty, inequality, and unemployment. The weakening of growth in the last few years combined with the COVID-19 shock further put at risk social development progress.
Last Updated: Mar 16, 2021
