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. The COVID-19 pandemic has worsened socio-economic inequalities.
Economic Outlook
After experiencing average annual growth of 4.4% between 1991 and 2015, Namibia’s economy stagnated in 2016 and fell into recession in the following year. The economy has since struggled to recover. Leading up to the mid-2010s, investments in mineral extraction, a boom in exports and government spending underpinned growth. Namibia subsequently 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 pandemic has had an unprecedented impact on Namibia’s economy and has exacerbated preexisting structural challenges. Real gross domestic product (GDP) contracted by 8.5% in 2020. The rebound is expected to be slower than initially expected, with growth projected at 1.2 percent in 2021 and 2.4 percent in 2022. 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. Progress on structural reforms will be required to raise Namibia’s growth potential.
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.
Despite this progress, deep underlying challenges remain in Namibia, undermining the prospects for further advancement. The pre-1990 history of systematic exclusion of the black majority from full participation in economic activities continues to shape society and the economy, constraining the country’s economic and social progress to this day. The key legacies of colonial rule and racial segregation are persisting territorial segregation and resource misallocation, and a lack of access to basic services for a large portion of the population. Economic advantage remains in the hands of a relatively small segment of the population, and significant inequalities persist. This lack of inclusiveness and vast disparities have led to a dual economy—a highly developed modern sector co-existing with an informal subsistence-oriented one—and are manifested in three main socioeconomic challenges that define the economy today:
- Namibia ranks as one of the world’s most unequal countries. Its Gini coefficient of 59.1 in 2015 was second only to South Africa in terms of inequality. Geographical disparities in both economic opportunities and access to services are large and widening. High levels of inequality result in starkly different poverty rates across different groups, including by age and gender.
- Relatively high poverty, lagging human capital, and poor access to basic services are interrelated problems. Namibia’s poverty rapidly declined from 1993/94 to 2015/16, but it remains high for the country’s level of development. Despite recent progress, Namibia ranked 117th among 157 countries on the Human Capital Index.
- The duality of the labor market, combined with slow job creation and low primary-sector productivity, results in very high unemployment.
Due to consistently negatived per capita GDP growth since 2016 and the negative impact of COVID-19 on livelihoods, poverty rates are projected to have increased. 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, in a context of planned fiscal consolidation, have created challenging conditions for growth.
Last Updated: Apr 07, 2022
