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Namibia

Namibia

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Key Facts

  • Capital: Windhoek
  • Region: Southern Africa
  • Official languages: English
  • Independence Day: March 21, 1990
  • Area: 824,000 sq km
  • Population (2018): 2.5 million
  • REC membership: SACU, SADC
  • WTO membership: January 1, 1995
  • GDP (2018): US$ 14.522 billion
  • GNI per capita (2018): US$ 5 220
  • Currency: Namibian dollar

Economic overview

Real GDP, which peaked at 6.1% in 2015, contracted by an estimated 1.0% in 2019, following a 0.5% contraction in 2018. Aggregate demand fell sharply in 2016 and 2017 as the government began fiscal consolidation to correct growing imbalances from high public spending and falling revenues from the Southern African Customs Union (SACU).

The fiscal deficit narrowed from a peak of 9% of GDP in 2016 to 5.4% in 2018 and is projected to average around 5% over the medium term. It was financed through domestic and foreign borrowings that pushed public debt from 39% of GDP in 2015 to 46% in 2018. The pressure on the domestic debt market constrained liquidity, crowded out private sector credit, and dragged down domestic demand.

Monetary policy was accommodative to support growth under favorable inflation conditions. Estimated at 4.5% in 2019, inflation is projected to remain within the 3%–6% target in the medium term.

The current account deficit, estimated at 3% of GDP in 2019, started improving in 2017 as exports rebounded and import growth weakened due to subdued economic activity. At the same time, mining construction projects ended and government capital spending was cut, sharply contracting construction and, through spillover effects on the rest of the economy, shedding jobs and reducing disposable incomes.

Real GDP growth is projected to recover to 1.9% in 2020 and 2.4% in 2021, on the back of construction and manufacturing. The government is pursuing reforms to improve the business environment, attract investment, and spur industrialization. Key reforms support protection of intellectual property, an industrial development agency, and public–private partnerships. An online business registration and licensing platform should boost domestic investment and foreign direct investment. Also approved is a policy to remove regulatory impediments to small and medium enterprises and improve their access to finance. And to address a skill mismatch and boost human capital, the government is expanding higher education and technical and vocational education training facilities.

The inauguration of the Walvis Bay Container Terminal in August 2019 improved the port’s efficiency and more than doubled its container handling capacity. Namibia has political stability, well-developed transport infrastructure, and abundant and diverse natural resources. Its potential as a regional transport and logistics hub and a participant in regional and global value chains benefits from a growing and dynamic regional market with well-developed transport corridors. Namibia’s huge pool of institutional savings could finance high-return investments to contribute to rapid, inclusive, and sustainable growth.

Subdued economic conditions in South Africa could dampen, however, demand for exports and reduce SACU receipts. Weak growth in the Southern Africa region could also reduce transit cargo and the demand for transport services. Fiscal consolidation could be jeopardized if revenues underperform due to fragile economic recovery. Weak GDP growth, leading to further cuts in capital spending, could prompt another credit and economic outlook downgrade by rating agencies. Mining growth could be constrained by weak global diamond demand if trade tensions shrink global growth. Erratic rainfall, following a severe drought, could constrain agriculture production. The fiscal space to stimulate the economy is limited by uncertain SACU revenues. With subdued wage growth and weak labor markets, private consumption is unlikely to strengthen soon. Stagnating productivity, skill mismatches, and a weak business regulatory environment keep the economy from reaching its potential.

Last updated: April 2020