however, to maintain alignment with NAMIBIA South African interest rates and avoid Recent developments capital outflows, and in response to incipi- ent inflationary pressures arising from Growth of the Namibian economy moder- depreciation, continued credit growth, ated in 2015 to 4.5 percent, from 6.4 per- and increasing food prices. The repo rate Table 1 2015 cent in 2014. Growth was driven by ongo- has been increased five times since June Population, million 2.5 ing massive extractive sector investments 2014, most recently with a 25 bps increase GDP, c urrent US$ billion 12.2 and continued government stimulus, par- to 6.75 percent in February 2016. GDP per c apita, c urrent US$ 4951 tially offsetting the impact of low com- The current account deficit remains wide Poverty rate ($1.9/day 2011PPP terms) a 22.6 modity prices, slowing of private sector (14.3 percent of GDP in 2015) reflecting a credit growth (9.5 percent in 2015, down low prices for mineral exports and elevat- Poverty rate ($3.1/day 2011PPP terms) 45.7 from 16.5 percent in 2014) and lower agri- ed imports for both mining investments Gini Coeffic ient a 61.0 cultural production and exports resulting and consumer products, the latter driven b Sc hool enrollment, primary (% gross) 109.5 from drought and an outbreak of foot and by fiscal stimulus and credit growth. In- b Life Expec tanc y at birth, years 63.9 mouth disease. ternational reserves reached a low of just Sources: World Bank WDI and M acro Poverty Outlook. Namibia has maintained an expansionary 1.5 months of import cover during 2015, Notes: fiscal stance since 2011, with government but have since recovered to 3.5 months, (a) M ost recent value (2009) (b) M ost recent WDI value (2013) pursuing a stimulus program to support primarily due to SACU receipts and cur- job creation and poverty reduction. An rency depreciation. overall deficit of around 6.6 percent of Relatively strong economic growth has GDP is expected in 2015 (the fiscal year not been sufficient to deal with poverty, Fiscal stimulus, rapid credit growth, and runs from April 1 to March 31), higher inequality, and unemployment. Using the large scale mining investments have been than the budgeted deficit of 5.4 percent of national poverty line of N$ 377.96, 28.7 driving strong growth and a widening GDP due to over-optimistic income tax percent of Namibian were poor in 2009/10, revenue projections. The deficit was par- following a 9.0 percentage point fall from current account deficit over recent years. tially financed by a US$750 million Euro- 37.7 percent in 2003/04. The reduction was As construction of new mining projects bond in 2015 (5.375 percent coupon with driven by gains in in rural areas. Using winds down and production begins, the 10-year maturity), with proceeds used to the international poverty lines, 19.7 per- current account should narrow, while the support foreign exchange reserves and cent of the population lived on less than finance investment projects. Total govern- $1.9 a day in 2015 compared to 22.6 per- government’s recent budget statement ment debt has grown rapidly and now cent in 2009. 42.9 lived below the 3.1 per signals welcome fiscal consolidation. stands at around 36 percent of GDP (from day poverty line in 2015 compared to 45.7 Strong recent growth and public spend- 12 percent of GDP in 2010). percent in 2009. Namibia remains one of ing on social programs has contributed to Inflation remained low and stable during the most unequal countries in the world, impressive reductions in poverty rates. 2015, at 3.4 percent down from 5.3 percent with a Gini coefficient of 0.61. in 2014, with low energy prices partly High unemployment is of particular con- Further poverty-reduction will require offsetting the impacts of depreciation and cern. The 2014 Labor Force Survey reports structural change in the economy to gen- increased food prices arising from an unemployment rate of 28.1 percent in erate more jobs for the unskilled. drought. Monetary policy has tightened, 2014, down slightly from 29.6 percent in FIGURE 1 Namibia / Actual and projected current account FIGURE 2 Namibia / Actual and projected poverty rates and and overall fiscal balance GDP per capita (PPP) Poverty Rate (%) GDP per capita (USD PPP) 2 60 12,000 0 50 10,000 -2 -4 40 8,000 -6 -8 30 6,000 -10 20 4,000 -12 -14 10 2,000 -16 -18 0 0 2012 2013 2014 2015 2016 2017 2018 2003 2005 2007 2009 2011 2013 2015 2017 Current Account Balance Fiscal Balance $1.9/day PPP $3.1/day PPP GDP per capita PPP Source: World Bank staff estimates. Source: World Bank (see notes to table 2). MPO 254 Apr 16 2013. At 39.2 percent, unemployment is growth and recent deterioration of the on transfers and grants may provide relief highest among youth. Unemployment is current account, but may prove difficult to to the affected population. higher among women (31.7 percent) com- implement, with a history of slippage pared to men (24.3 percent). Most employ- against expenditure targets set under suc- ment (31.4 percent) is in low productivity sectors, including agriculture, forestry and cessive MTEFs. Inflation is expected to remain moderate, Risks and challenges fishing. 47.1 percent of employment is in at around 5.0 percent, as monetary the informal sector, contributing to in- measures constrain credit growth, fiscal Planned fiscal consolidation and produc- come insecurity and vulnerability. consolidation constrains domestic con- tion from new extractive industry pro- sumption, and recovery of agricultural jects should support a reduction in fiscal production eases food prices. The current and current account deficits. This out- Outlook account is expected to further deteriorate in 2016, widening to 16.6 percent of GDP come, however, is dependent on success- ful implementation of planned expendi- as imports for investment projects contin- ture cuts in the context of expected de- The economy is expected to grow by 4.2 ue and mineral prices remain weak. Over clines in SACU revenues. Further de- percent in 2016, with weak prices for the medium-term, however, the current clines in commodity export prices and mineral exports and continuing negative account deficit is expected to narrow to worsening of external conditions also drought impacts partially offset by in- around 9.3 percent of GDP as export pric- present downside risks. creased exports from new extractive pro- es strengthen and completion of extractive Over the longer-term, Namibia faces im- jects. Over the medium -term, growth is projects leads to a reduction of imports portant challenges in diversifying the expected to reach 5.5 percent by 2018, and an increase in mineral production. economy and broadening economic op- with the impacts of declining investment Limited progress is expected in poverty portunities. The economy remains heavily and fiscal consolidation offset by recov- reduction. 19.4 percent will be living be- dependent on mining, while limited de- ery in extractive sector export prices and low the $1.90/day international extreme mand for unskilled labor leads to concen- increasing volumes as new projects poverty line in 2016, 18.9 percent in 2017, tration of labor in unproductive subsist- reach capacity. and 18.5 percent in 2018. Using the $3.1/ ence agriculture. Policy priorities for a Responding to downward revenue revi- day poverty line, 42.6 percent of Namibi- more inclusive economy include: i) im- sions, the recent budget statement an- ans are forecasted to be poor in 2016, 42.2 proving access to and quality of second- nounced expenditure cuts averaging 1.7 percent in 2017, and 41.7 percent in 2018. ary, tertiary, and vocational education; percent of GDP per year over 2016-2018, The drought is expected to adversely and ii) addressing labor market rigidities. bringing the deficit down to around 3.1 affect the rural poor who rely on subsist- percent of GDP by 2018. Fiscal consolida- ence farming as well as the urban poor via tion is welcome in the context of robust upward pressure on food prices. Spending TABLE 2 Namibia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2013 2014 2015 e 2016 f 2017 f 2018 f Real GDP growth, at constant market prices 5.7 6.4 4.5 4.2 5.4 5.5 Private Consumption 8.5 8.9 5.0 5.0 5.0 6.0 Government Consumption 4.8 3.7 9.7 -4.1 4.7 0.2 Gross Fixed Capital Investment 14.4 38.7 -1.9 -6.4 -6.2 1.5 Exports, Goods and Services 6.9 1.4 5.0 5.1 11.0 5.5 Imports, Goods and Services 8.8 22.6 4.0 -2.6 2.5 2.5 Real GDP growth, at constant factor prices 5.2 6.0 4.5 4.2 5.4 5.5 Agriculture -11.4 4.6 -8.0 7.8 2.6 3.0 Industry 6.2 3.3 5.8 2.9 7.1 6.0 Services 6.9 7.4 5.3 4.5 4.9 5.5 Inflation (Consumer Price Index) 5.6 5.3 3.4 5.0 5.0 5.0 Current Account Balance (% of GDP) -4.7 -14.7 -14.3 -16.6 -11.9 -9.3 Financial and Capital Account (% of GDP) 6.6 18.2 14.3 16.6 11.9 9.3 Net Foreign Direct Investment (% of GDP) 6.5 5.1 6.3 10.7 7.4 6.5 Fiscal Balance (% of GDP) -3.9 -6.2 -6.6 -5.1 -4.9 -3.1 Debt (% of GDP) 24.2 24.6 36.0 37.9 39.2 38.4 Primary Balance (% of GDP) -2.9 -4.9 -5.2 -3.0 -2.6 -1.1 Poverty rate ($1.9/day PPP terms) a,b,c 20.6 20.0 19.7 19.4 18.9 18.5 Poverty rate ($3.1/day PPP terms) a,b,c 43.8 43.2 42.9 42.6 42.2 41.7 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: f = fo recast. (a) Calculatio ns based o n 2009-NHIES. (b) P ro jectio n using annualized elasticity at regio nal level with pass-thro ugh = 1based o n GDP per capita co nstant P P P . MPO 255 Apr 16