GDP. Moreover, deterioration of eco- NAMIBIA nomic activity and lower revenues Recent developments (mostly from mining and SACU), led to temporary financing problems for the The Namibian economy slowed substan- budget in the first half of FY 2016/17. tially in 2016, registering modest growth For example, in absence of interest from Table 1 2016 of 1.2 percent, contrasted with average the private financial institutions in bid- Population, million 2.5 gains of more-than 5 percent over the pre- ding for the government issued debt GDP, c urrent US$ billion 10.3 ceding 5 years. A slowdown is noted instruments, the state owned pension GDP per c apita, c urrent US$ 4083 across all production sectors of the coun- fund became the largest bidder on the Poverty rate ($1.9/day 2011PPP terms) a 22.6 try, tied to still-low mineral prices, government auctions during the second a 45.7 drought in the region, and the process of and third quarter of 2016. Consequent- Poverty rate ($3.1/day 2011PPP terms) fiscal consolidation. ly, little -to-no space for further fiscal Gini Coeffic ient a 61.0 Subdued growth in the global economy expansion remained, and a necessary b Sc hool enrollment, primary (% gross) 111.4 and low mineral prices have affected min- process of fiscal consolidation began b Life Expec tanc y at birth, years 64.3 ing activity in Namibia, delaying startup with the mid-year budget review of Source:World Bank WDI and M acro Poverty Outlook of the already-completed Husab uranium October 2016. Following the review, the Notes: mine. This has yielded significant negative provisionally projected budget deficit of (a) M ost recent value (2009) (b) M ost recent WDI value (2014) spillovers to many sectors of the economy, more -than 8 percent of GDP was re- including external trade and public sector duced by two percentage points. Budg- finance. Indeed, as the Husab mine was et cuts have been exacted mostly on completed and with lack of additional capital expenditures, and in absence of mega-projects in the country, construction large private investment projects, re- The pace of economic activity subsided activity dropped significantly in 2016, sulted in contraction of overall invest- contributing to the overall slowdown. ment activity in the country. significantly during 2016, in part as glob- Furthermore, weak economic growth The current account deficit is estimated to al demand for commodities remained among Namibia’s trading partners, for have narrowed marginally in 2016 as a sluggish. In the medium-term, growth is example in Angola, has adversely affected result of lower imports of machinery and anticipated to recover gradually, reaching most of Namibia’s tertiary sector activities equipment due to the completion of the (transport, wholesale and retail trade and Husab mine and due to slowdown of do- 4 percent by 2018, driven mostly by min- real estate activities). And the contribution mestic activity. Inflation in 2016 picked up ing and services activities. Required fiscal from agricultural production to total value to 6.7 percent, reflecting a rapid pick-up in consolidation is expected to continue, added during 2016 was negative due to food prices. though the process will be highly reliant drought in the region. The easing of economic growth is evident on mining sector revenues and SACU Expansionary fiscal policy of the previous in the marginal increase in poverty rates: years, together with the depreciation of 17.1 percent of Namibians lived below the receipts. Further gains in poverty reduc- the Namibian currency, resulted in a $1.9 per day international poverty line in tion are likely to be modest owing partly sharp increase in public debt of more than 2016 compared to 16.9 percent in 2015. to high inequality and unemployment. 15 percent of GDP in the last three years, This followed on the back of a persistent exceeding the national cap of 35 percent of and deepening drought which curtailed FIGURE 1 Namibia / Actual and projected current account FIGURE 2 Namibia / Poverty rate and GDP per capita and overall fiscal balance Percent of GDP Poverty rate (%) GDP per capita (constant LCU) 0 60 50000 45000 -2 50 40000 -4 35000 40 -6 30000 30 25000 -8 20000 20 -10 15000 10000 -12 10 5000 -14 0 0 2013 2014 2015 2016 2017 2018 2019 2003 2005 2007 2009 2011 2013 2015 2017 2019 Current Account Balance Fiscal Balance $1.9/day PPP $3.1/day PPP GDP pc Sources: Bank of Namibia, Ministry of Finance and World Bank staff calculations. Sources: World Bank calculations based on 2003 and 2009-NHIES. MPO 250 Apr 17 agricultural production and led to rising The current account deficit is anticipated food prices. Poverty reduction efforts con- tinue to be dampened by high inequality to compress in 2017 as a result of urani- um exports from the expected start of Risks and challenges rates: the consumption Gini coefficient operation at the Husab mine, and should was 0.597 in 2010. Further, high unem- continue to narrow gradually as the rest Namibia is highly vulnerable to shocks ployment that stood at 28.1 percent in of mining sector production recovers. from the external environment. As an 2014, slightly down from 29.6 percent in Inflation is expected to ease into the me- economy heavily dependent on commodi- 2013, tends to slow poverty reduction. dium term notably as agricultural pro- ty-exports and public sector activity, ma- duction rebounds and fiscal consolida- jor risks stem from a weaker-than ex- tion continues. pected global recovery, principally plac- Outlook Modest-to no gain in poverty reduction is expected for 2017. Forecasts suggest ing downward pressure on mineral prices. For example, due to low uranium prices, that the proportion of Namibians living there is a risk that startup of operations at In the medium term, economic activity is below $1.9 per day will fall marginally the Husab mine may be postponed again. expected to recover slowly, reaching GDP from 17.1 percent in 2016 to 16.0 percent The current estimates indicate that the growth of 3 percent in 2017 and around 4 by 2019. At the $3.1 per day poverty line, total valued added of the Husab mine will percent in the years thereafter. Near-term 39.1 percent of Namibians are expected be between 3.5 and 4 percent of GDP an- recovery will be driven by the expected to be poor in 2017, declining to 37.9 per- nually. Lower uranium prices will reduce start-up of the Husab uranium mine in cent by 2019. Recovery in agricultural the capacity utilization and hence, impede 2017. Services are also expected to contrib- production is therefore not expected to exports and GDP growth. Persistent eco- ute significantly to recovery, as the Ango- carry a large effect on poverty reduction, nomic management challenges in South lan economy picks up gradually; while a especially in the near term. The U.N. Africa (as reflected by the recent down- further boost, though with limited impact, Food and Agriculture Organization grade of long term foreign currency de- should stem from recuperation in agricul- (FAO) indicates that- based on current nominated debt to speculative), would tural production. conditions and weather forecasts- cereal result in lower growth and SACU reve- Fiscal consolidation will continue through production is expected to range below nues, inhibiting fiscal consolidation. FY 2019/20, according to which the budget average levels in 2017. In addition, losses Over the longer-term Namibia faces im- deficit is projected to narrow to less-than 2 are still being recorded in the livestock portant challenges in diversifying its econo- percent of GDP. Further cuts in govern- sector, though improved vegetation con- my and broadening economic opportunity. ment spending (mostly capital) as well as ditions are expected to ease this situa- Some of the policy priorities for more inclu- a gradual increase in fiscal revenues and tion. Further, although above -normal sive growth should include improving ac- SACU receipts are expected to underpin precipitation is projected for this season, cess-to and quality-of education, and ad- this process. there will be variation across regions. dressing significant labor market rigidities. TABLE 2 Namibia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2014 2015 2016 e 2017 f 2018 f 2019 f Real GDP growth, at constant market prices 6.5 5.3 1.2 3.0 4.0 4.2 Private Consumption 4.4 2.8 1.2 1.8 2.3 2.5 Government Consumption 4.8 9.9 -2.6 -1.4 -0.3 -0.2 Gross Fixed Capital Investment 32.8 9.8 -3.2 -0.1 6.5 7.4 Exports, Goods and Services 3.5 -11.4 2.0 10.0 5.5 5.0 Imports, Goods and Services 16.8 -2.6 -2.5 2.0 3.0 3.3 Real GDP growth, at constant factor prices 6.3 4.5 1.2 3.0 4.0 4.2 Agriculture 5.5 -7.4 -4.0 3.5 4.0 4.3 Industry 3.4 5.3 -2.2 7.1 5.8 5.8 Services 7.8 5.5 3.3 1.1 3.2 3.4 Inflation (Consumer Price Index) 5.4 3.4 6.7 5.8 5.3 5.1 Current Account Balance (% of GDP) -8.9 -14.3 -12.0 -7.9 -7.0 -6.7 Financial and Capital Account (% of GDP) 10.0 15.4 13.1 9.0 8.2 7.9 Net Foreign Direct Investment (% of GDP) 3.9 3.9 3.9 4.0 4.1 4.1 Fiscal Balance (% of GDP)d -4.0 -7.0 -6.3 -3.6 -2.9 -1.8 Debt (% of GDP) 25.3 38.1 42.3 42.5 42.8 43.0 d Primary Balance (% of GDP) -2.6 -5.5 -3.9 -1.0 -0.2 0.1 a,b,c Poverty rate ($1.9/day PPP terms) 17.6 16.9 17.1 16.9 16.5 16.0 Poverty rate ($3.1/day PPP terms) a,b,c 39.9 39.0 39.3 39.1 38.5 37.9 So urces: Wo rld B ank, M acro eco no mics and Fiscal M anagement Glo bal P ractice, and P o verty Glo bal P ractice. No tes: e = estimate, f = fo recast. (a) Calculatio ns based o n 2003-NHIES and 2009-NHIES. (b) P ro jectio n using annualized elasticity (2003-2009) with pass-thro ugh = 1based o n GDP per capita in co nstant LCU. (c) No wcast: 201 4 - 2016. Fo recast are fro m 2017 to 2019. (d) Fiscal year starts fro m A pril 1st. MPO 251 Apr 17