Namibia experienced a protracted economic recession between 2015 and 2020 with a 7.3% contraction in GDP during 2020 alone, largely due to the impact of the Covid-19 pandemic.

There are, however, projections for improved economic growth in 2021 after several successive economic contractions.

Namibia experienced a protracted economic recession between 2015 and 2020 with a 7.3% contraction in GDP during 2020 alone, largely due to the impact of the Covid-19 pandemic.

There are, however, projections for improved economic growth in 2021 after several successive economic contractions. In addition, high levels of fiscal deficits and debt, coupled with the challenges of fiscal consolidation in the face of a subdued growth outlook and high inequality, are a concern.

It is, however, important to note that favourable development policies and investment incentives are noted. The government encourages foreign investment to help develop the national economy and benefit its population. The Foreign Investment Act guarantees equal treatment for foreign investors and Namibian firms and the Investment Commission and Chamber of Commerce offer assistance to investors.

GDP AND ECONOMIC GROWTH

Q2 2021 offering economic rebound

A year-on-year economic rebound of 1.6% was recorded in the second quarter of 2021, compared to an upwardly revised contraction of 6.7% for the previous quarter. Prompted by the slight relaxation of COVID-19 measures and the vaccine roll-out, this marks the first quarterly expansion registered since 2019. Overall economic recovery is forecasted at 2.1% in 2021.

Looking at a wider GDP narrative, Namibia experienced a protracted economic recession between 2015 and 2020 with a 7.3% contraction in GDP during 2020 alone, largely due to the impact of the Covid-19 pandemic. Similar to other global economies, Namibia’s economy is projected to recover from pandemic-induced lockdown restrictions and trade interferences and grow 3.3% over the medium term.

Sector performance, Q2 vs Q1 2021

Key positive performances were noted in the following sectors:

• Wholesale and retail (17.3% vs -5.2%)
• Restaurants and hotels (34.3% vs -10.4%)
• Administration and support services (15.6% vs -10.6%)
• Transport and storage (1.1% vs -8.7%).

Meanwhile, a decline was marked in

• Financial services activities (-17% vs -9.8%)
• Manufacturing (-5% vs -20.1%)
• Mining (-1.5% vs -21.5%)
• Agriculture (-6.9 % vs -4.4%), and
• Construction (-16.9% vs -22%)

Economic considerations

Revisions to the nominal GDP have resulted in a budget deficit estimated at 4.7% compared to 4.1%. The public debt as a percentage of GDP is marked at 54.8%. Revenue is expected to decline by approximately 6.1% or NAD3.4 billion in 2021/22 compared to the preceding financial year, largely due to a reduction in South African Customs Unit (SACU) recipients and taxation of companies.

In addition to fiscal stimulus measures, the repo rate has been contracted to an all-time low at 3.75%. Inflation stood at 2.2% in 2020, which is the lowest it has been in 20 years and a clear indicator of the multi-dimensional influence of the demand shock on basic input and service prices.17

A steady recovery in financial services, tourism, retail and wholesale trade, and the mining industries, combined with an improved regional and global economic environment will bolster GDP growth into 2022. In the longer term, FDI is seen as a key driver for future economic growth alongside an improved business environment and encouraging private-sector growth in the face of budgetary constraints and fiscal deficits.

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