Namibia is largely desert, ranchland with a long coastline on the South Atlantic, and borders South Africa, Botswana and Angola. The country’s natural mineral riches and tiny population of about 2.5 million (2016) have made it an upper-middle-income country. Political stability and sound economic management have helped anchor poverty reduction, howeverthis has not yet been accompanied by job creation, and extreme socio-economic inequalities inherited from the years it was run as under an apartheid system still persist, despite generous public spending on social programs.
Real economic activity contracted 1% in 2017, registering a contraction for four consecutive quarters.
The continuation of the fiscal consolidation process led domestic consumption to stall. This process was done mostly through reduction in the capital expenditures that affected most sectors of the economy, especially construction and tertiary sector activities. The construction activity shrank in 2017 by more than 30% on annual basis. This reflects the base effect from last year due to the completion of the Husab mine, without any additional large construction projects to offset this impact. Within the manufacturing sector, a contraction is also noticed at the electricity production sub-sector because of the closure of two power plants (Van Eck and Paratus) due to regular maintenance.
The fiscal consolidation process significantly affected domestic consumption this also reflected on the services sector. Sharp contraction is noticed in the wholesale and retail trade, tourism sector and public administration. The remaining tertiary sector activities registered a significant slow-down compared to 2016, for which additional impact had the economic slow-down in Angola. The contraction of the domestic demand also resulted in significant reduction of the credit and deposit growth which reflected in significant slow-down of the financial intermediation services.
A positive signal for the Namibian economy came from the mining and agricultural activities. The mining sector activity increased by more than 15% on annual basis in 2017, due to the higher diamond and uranium production. The diamond production in 2017 has expended by more than 10% and reflects the base effect from the previous year when some of the offshore diamond extraction vessels were closed due to regular maintenance. The uranium production increased by more than 25% in 2017 and this is mostly a result of the start-up of operation of the Husab mine. The agricultural production also rebounded in 2017 from the previous droughts with a solid growth of 5%.
In the medium-term, economic activity is expected to recover slowly. Annual GDP growth is expected to reach 1.5% in 2018 and 3% in 2020.
Near-term recovery will be driven by the increase in mining production. The uranium production is expected to increase as the Husab mine ramps-up its operation and is expected to reach its full production capacity by 2020. Diamond production will also increase gradually consistent with the prospects for recovery in the global demand. Services are expected to contribute to the recovery as the domestic demand and the regional trading partners slowly recover. The economic recovery will also be facilitated with the planned infrastructural investment projects for which a funding is expected by the AfDB. An impeding factor to growth recovery will be the recent credit rating downgrade that will further reduce investors’ confidence.
Namibia’s relatively strong economic growth has not been enough to deal with its levels of poverty, inequality, and unemployment. By the national poverty line (N$377.96), poor Namibians made up 28.7% of the total population in 2009/10, a drop of 9.0 percentage points from 37.7% in 2003/04.
The reduction was driven by gains in rural areas.
By the international poverty line, 16.9% of the population lived on less than $1.90 a day in 2015, compared to 21.3% in 2010. In 2015, 39.0% lived below the $3.10 per day poverty line, compared to 44.3% in 2010. Namibia remains one of the most unequal countries in the world, with a Gini coefficient of 0.597 in 2010.
Namibia’s government continues to exercise the requisite leadership in developing and financing the policies it needs to address its development challenges, policies such as the Harambee Prosperity Plan, and the fifth National Development Plan. Program implementation and delivery of public services lags behind and undermines sound policies.