|Select Economic and Financial Indicators||2014||2015||2016||2017e||2018f|
|Real GDP (% change)||6.4||6.0||1.1||-1.5||0.8|
|GDP (USD bn)||12.8||11.6||10.9||11.9||12.2|
|Fiscal Balance (% GDP)||-5.9||-8.0||-7.7||-4.8||-6.0|
|Broad Money (% change, end period)||6.9||10.2||4.9||8.2||8.4|
|Exports (USD bn)||5.7||5.0||4.1||4.5||4.7|
|Imports (USD bn)||8.5||7.9||6.3||6.3||6.3|
|Current Account Balance (% GDP)||-10.8||-12.6||-14.0||-7.3||-6.6|
|FX Reserves (USD bn, end period)||1.3||1.9||1.2||1.3||1.4|
|Exchange Rate (average)||10.85||12.78||14.70||13.31||13.16|
Real GDP: We expect a recovery in Namibia in 2018, with the economy forecast to exit its first full year recession since 1993. Cutbacks in construction spending, a drought induced slowdown in agriculture and tamer mining activity induced a slowdown in 2016 (to 1.1%, from above 6% in 2015) and a contraction in 2017. However, completion of a new uranium mine alongside higher diamond output inform positive expectations about mining output in 2018. In addition, improved rainfall and a NAD1bn Agricultural Mechanisation and Seed Improvement Project loan from the African Development Bank (approved in December 2017) raise likelihood of a rebound in agricultural output. Nonetheless, overall growth expectations are somewhat tempered by continued fiscal consolidation, which as in 2016 and 2017, points to subdued construction spending (5% of GDP). Consequently, we a mild recovery of 0.8% this year, which should strengthen thereafter.
Inflation: Inflation is set to slow somewhat in 2018, amid an ongoing deceleration in house price growth. Furthermore, improved rainfall, which underpins positive expectations over agricultural output, and a firmer currency, following ZAR strengthening, bolster prospects for tamer inflation. While the upswing in oil prices presents upside risks to inflation, we believe the drag from declining food and house prices should combine to mute impact on headline inflation.
Fiscal balance: The deficit is expected to widen, despite ongoing attempts at fiscal consolidation. The Namibian 2017/18 budget targets a moderation in fiscal deficit to 3.6% of GDP from 6.3% in 2016/17. Following caps to public sector salary increases and moderation in government borrowing, fiscal spending for 2017/2018 targets a 2.2% y/y rise to NAD62.5bn. On the revenue side, an increase in excise taxes on alcohol and tobacco alongside reforms to the tax system aims to drive a 10% y/y increase in tax revenues to NAD53.4bn (95% of fiscal revenues). However, we are doubtful of a tightening deficit over 2018, as the prospect of fiscal slippages rises ahead of the general elections scheduled for 2019. Moreover, our growth estimate and forecast for 2017 and 2018, respectively, are below those projected in the 2017/2018 budget, undermining Namibia’s fiscal outlook. Accordingly, we forecast a wider budget deficit of about 6%.
Current account: The current account deficit should moderate further in 2018 on account of anticipated recovery in mining exports, due to higher commodity prices and on-streaming of new production uranium and diamond mines. However, imports are likely to remain subdued as fiscal consolidation contains imports of capital goods. In all, while we expect the external account imbalance remain wide, it should narrow somewhat to below 7% of GDP in 2018 from 7.3% of GDP in 2017.
Key risks to outlook stem from renewed dry weather conditions which would hurt agricultural output and lower uranium and diamond prices. Furthermore, Namibia’s interconnection with the SACU region exposes it to the risk of lower customs revenues from a slowdown in regional imports which could adversely impact on fiscal revenue projections. In addition, following a surge in house prices in recent years, Namibia’s financial system is vulnerable to sudden sharp correction.
Exchange rate structure
|Target||NAD1 to ZAR1|
|Type of intervention||Via central bank|
|FX Products||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Daily trading volume (USD mn)||n/a||n/a|
|Average trade size (USD mn)||n/a|
|Trading hours||24 hours|
|FX Market Structure||The NAD is guaranteed by a pegged exchange rate with the ZAR. FX spot deals are settled in ZAR. Only fully licensed dealers are permitted to deal FX in Namibia.|
|Non-resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||Non-residents of CMA zone are subject to exchange rate restrictions which require central bank approval for capital flows||n/a|
|Resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||No restrictions||n/a|
|Primary Market||Treasury bills||Treasury notes||Treasury bonds||Central Bank bills||OMOs|
|End use||Government financing||Government & infrastructure financing||Liquidity management|
|Maturity structure||91- to 364-days||5- to 30-yrs||7-days|
|Daily trading volume||Limited trading||n/a|
|Average trade size||Limited trading|
|Nedbank contact details for Namibia|
7th Floor, Old Mutual Towers, Independence Avenue, Windhoek, Namibia
Tel: +264 61 295 2000 / Fax: 264 61 295 2079
|Government debt (% GDP)||25.5||39.4||40.0||41.5||43.6|
|External debt (official creditors, % GDP)||7.6||13.0||17.5||16.5||17.2|
|External public debt stock (USD bn)||1.0||1.5||1.9||2.1||2.3|
|Share of total sub-Sahara debt (%)||0.4||0.6||0.6||0.6||0.6|
Hydrocarbon & mineral production
Namibia is a diverse producer of precious and industrial metals. The country’s most important mineral resource is high-quality alluvial diamonds, with output of 1.7mn carats in 2016. Uranium is the country’s second leading mineral, with annual production of 4,252 tonnes, most of which is exported to France, China, the USA & Canada for their nuclear industries. Namibia has the potential to become the world’s largest uranium exporter following significant investment in developing the country’s deposits. Namibia is also produces modest quantities of copper, zinc, lead, gold and manganese, and acts as a re-export hub for copper & diamonds from the DRC and Zambia.
Namibia has no known crude oil reserves, but has an estimated 3.3 trillion cubic feet of natural gas reserves largely located offshore. The most significant discovery to date is the offshore Kudu field whose gas is intended for a gas-to-power plant for the domestic grid. The US$760mn project has been scaled down from a planned 850MW to 443MW and when operational is intended to meet the country’s entire power needs. Namibia consumes over 1mn tonnes of refined product annually, half of which is imported from South Africa and the balance from refineries in Asia and Europe.
Soft commodity production
Namibia does not have a well-developed agricultural sector, given its lack of arable land. Agricultural output is on a small scale and is focused on staple food production, led by roots & tubers (364,000 tonnes in 2016), maize (64,000 tonnes) and millet (45,000 tonnes). The country is a major livestock producer and exporter to the sub-region.
Namibia’s imports totalled US$4.8bn in 2017. The country is heavily dependent on imports of capital goods, notably machinery & vehicles together worth US$1bn in 2017, which partly reflects the country’s role as a re-export hub. Given the country’s lack of refining capacity, Namibia is dependent on imports of petroleum products (worth US$285mn in 2017) and electricity (US$135mn), as well as on industrial raw materials, including iron & steel (US$263mn), plastics (US$133mn) and rubber (US$80mn). Namibia also imports large quantities of consumer goods, led by electronics (US$325mn), apparel & footwear (US$218mn) and pharmaceuticals (US$137mn). Namibia acts as a re-export hub for minerals from the DRC and Zambia, importing US$286mn worth of copper and copper ore in 2017, all of which was re-exported. Given the lack of domestic food production, the country imports significant volumes of food, including beverages (US$136mn), sugar (US$77mn) and cereals (US$61mn).
Namibia’s exports totalled US$3.5bn in 2017, dominated by minerals and re-exports. Diamonds are Namibia’s most valuable commodity export, worth US$367mnin 2017, half of which went to Botswana for polishing and re-export to world markets. Namibia’s other mineral exports include zinc (US$352mn in 2017), gold (US$299mn) and uranium (US$295mn). The country’s largest single export is re-exports of copper from neighbouring DRC, worth US$649mn in 2017. Namibia is also an important exporter of fish (worth US$646mn in 2017), mainly to the EU and the SADC zone, as well as of live animals (US$184mn) and meat (US$93mn), mainly to South Africa and the UK. Namibia also acts as a re-export hub for capital and consumer goods, including electronics (US$87mn) and machinery (US$42mn).