Recent Developments & Prospects
Economic Cooperation, Regional Integration & Trade
Economic & Political Governance
Public Sector Management, Institutions & Reform
Natural Resource Management & Environment
Thematic analysis: Structural transformation and natural resources
Authors: Martha Phiri, Ojijo Odhiambo
- 2014 growth accelerated to 5.3% and should remain strong in coming years as new mines start production and exports grow.
- Political stability and prudent fiscal management have made Namibia attractive for investment but it must boost quality of education and training to improve skills and enhance competitiveness.
- Namibia must deepen reforms to get better value from agriculture and extend nonmineral diversification to create jobs and reinforce spatial inclusion.
Namibia held off the global economic slowdown, posting growth rates above 5% since 2010. Recovery remains on course despite the winding down of official fiscal stimulus measures. Gross domestic product (GDP) growth accelerated to 5.3% in 2014 from 5.1% in 2013 with robust construction activity and high consumer demand. Growth is expected to improve to 5.6% in 2015 and 6.4% in 2016 as external demand improves and new mines start production and exporting. Tight monetary policy has kept consumer price index (CPI) inflation within the target range of 3% to 6%. The Bank of Namibia in August 2014 implemented a second increase in the repo rate by 25 basis points to 6% to stabilise rising inflation caused by escalating food and transport prices. Consequently, the CPI inflation rate moderated from 6.1% in June to 4.7% in December.
Political stability and prudent fiscal management have helped anchor Namibia’s high growth rates and poverty reduction efforts. With strong ties to South Africa, the region’s second biggest economy, Namibia has stronger competitiveness and investment attraction 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. Work on a new Public Procurement and Public Finance Management law must be speeded up to reinforce economic governance and public sector management. Namibia also needs better regulatory capacity for public-private partnerships to help public sector investment programmes. Fiscal consolidation, including rationalising public sector wages, should continue to achieve efficiency gains and help attain a more sustainable current account balance. Efforts to enhance education and training quality must be stepped up and anti-corruption efforts redoubled to recapture public confidence and strengthen the country’s strong governance record.
Namibia has made progress reducing geographical income disparities despite its largely arid climate, extremely low population density and a dual economy where a highly productive capital intensive mining sector operates alongside an agriculture sector that is of low productivity but a major employer. Thanks to the government’s Vision 2030 and national development plans, Namibia has seen a 40% reduction in poverty between 1993/94 and 2009/10 with the biggest improvement in rural areas. Accelerated implementation of the Decentralisation Enabling Act of 2000 and deeper structural reforms to intensify value addition in agriculture and broaden nonmineral diversification will be key in consolidating progress made in promoting spatial inclusion in Namibia.
Table 1: Macroeconomic indicators
|Real GDP growth||5.1||5.3||5.6||6.4|
|Real GDP per capita growth||3.2||3.4||3.7||4.6|
|Budget balance % GDP||-1.1||5||6.2||4.8|
|Current account balance % GDP||-5.1||-4||-1.7||-1.4|
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.