depreciation, continued credit growth, NAMIBIA and increasing food prices. The repo rate Recent developments has been increased five times since June 2014, including a 25 bps increase to 6.75 Growth of the Namibian economy moder- percent in February 2016. ated in 2015 to 4.5 percent from 6.4 per- The current account deficit remains sub- Table 1 2015 cent in 2014. Growth was driven by ongo- stantial, registering some 14.3 percent of Population, million 2.5 ing massive extractive sector investments GDP in 2015,reflecting low prices for min- GDP, c urrent US$ billion 12.2 and continued government stimulus, off- eral exports and elevated imports for both GDP per c apita, c urrent US$ 4947 setting in part the effects of lower com- mining investment and consumer prod- Poverty rate ($1.9/day 2011PPP terms) a 22.6 modity prices, slower private sector credit ucts--the latter driven by fiscal stimulus a growth (9.5 percent in 2015, down from and credit growth. International reserves Poverty rate ($3.1/day 2011PPP terms) 45.7 16.5 percent in 2014) and weaker agricul- reached a low of just 1.5 months of import Gini Coeffic ient a 61.0 tural production and exports stemming cover during 2015, but have since recov- b Sc hool enrollment, primary (% gross) 109.5 from drought and foot and mouth disease. ered to 3.5 months, primarily due to b Life Expec tanc y at birth, years 63.9 Namibia has maintained an expansionary SACU receipts and currency depreciation. Sources: World Bank WDI and M acro Poverty Outlook. fiscal stance since 2011, with government Relatively strong economic growth has Notes: pursuing a stimulus program to support not been sufficient to deal with poverty, (a) M ost recent value (2009) (b) M ost recent WDI value (2014) job creation and poverty reduction. The inequality, and unemployment. And this overall deficit was 6.6 percent of GDP in has recently been exacerbated by persis- 2015, higher than the budgeted deficit of tent and deepening drought, conditions 5.4 percent due to over-optimistic income that have hit agricultural production hard, As new mining investment winds down tax revenue projections. The deficit was as crops failed and livestock deaths and production begins, Namibia’s current partially financed by a US$750 million surged. About 19.5 percent of the popula- account deficit should narrow, while gov- Eurobond in 2015 (5.375 percent coupon tion lived on less than $1.9 a day in 2015 with 10-year maturity), with proceeds compared to 20.0 percent in 2014. 42.8 ernment works toward fiscal consolidation. bolstering reserves and financing invest- percent lived below the $3.1 per day inter- GDP gains are expected to reach 5.5 per- ment projects. Total government debt now national poverty line in 2015 compared to cent by 2018, grounded in extractive in- stands at around 36 percent of GDP up 43.2 percent in 2014. Namibia remains one dustries. Strong growth and spending on substantially from 12 percent in 2010. of the most unequal countries in the Inflation remained low and stable during world, with a consumption Gini coeffi- social programs have contributed to im- 2015, at 3.4 percent down from 5.3 percent cient of 0.597 in 2010. pressive reductions in poverty. But further in 2014, with easing energy prices partly High unemployment is of particular con- progress will require structural reforms to offsetting the effects of depreciation and cern. The 2014 Labor Force Survey reports generate more jobs for the unskilled. Per- increased food prices arising from an unemployment rate of 28.1 percent in sistent drought poses food and water secu- drought. Monetary policy has tightened, 2014, down slightly from 29.6 percent in however, to maintain alignment with 2013. At 39.2 percent, unemployment is rity risks; and as agriculture employs 70 South African interest rates and avoid highest among youth and is higher percent of the population, poverty reduc- capital outflows, and in response to incipi- among women (31.7 percent) compared tion will be pressured in coming years. ent inflationary pressures arising from to men (24.3 percent). Most employment FIGURE 1 Namibia / Actual and projected current account FIGURE 2 Namibia / Actual and projected poverty rates and and overall fiscal balance GDP per capita % of GDP Poverty Rate (%) GDP per capita (constant LCU) 2 60 60000 0 -2 50 50000 -4 40 40000 -6 -8 30 30000 -10 20 20000 -12 -14 10 10000 -16 0 0 -18 2003 2005 2007 2009 2011 2013 2015 2017 2012 2013 2014 2015 2016 2017 2018 Current Account Balance Fiscal Balance $1.9/day PPP $3.1/day PPP GDP pc Source: World Bank staff estimates. Source: World Bank (see notes to table 2). MPO 252 Oct 16 (31.4 percent) is in low productivity sectors, measures constrain credit growth, fiscal as the urban poor via upward pressure on including agriculture, forestry and fishing. consolidation restrains domestic con- food prices. Spending on transfers and While a full 47.1 percent of employment is sumption, and recovery of agricultural grants will provide a degree of relief for in the informal sector, contributing to in- production helps to ease food prices. The the affected population. come insecurity and vulnerability. current account is expected to deteriorate further in 2016, widening to 16.6 percent of GDP, as imports for investment projects Risks and challenges Outlook gain momentum and mineral prices re- main weak. Over the medium-term, how- ever, the current account deficit is ex- Planned fiscal consolidation and produc- The economy is expected to grow by 4.2 pected to narrow to around 9.3 percent of tion from new extractive industry projects percent in 2016, with weak prices for min- GDP as export prices strengthen and com- should support a reduction in fiscal and eral exports and continuing negative pletion of extractive projects reduces im- current account deficits. This outcome, drought effects partially offset by in- ports and increases mineral production however, is dependent on implementation creased exports from new extractive pro- and exports. of planned expenditure cuts in the context jects. Over the medium-term, growth is Steady yet moderate progress in poverty of expected declines in SACU revenues. expected to reach 5.5 percent, with spillo- reduction is expected due to both strong- Further falloff in commodity export prices vers of declining investment and fiscal er GDP gains and public social sector and worsening of external conditions also consolidation offset by recovery in extrac- outlays. 19.2 percent of the population present downside risks. tive sector export prices and increasing will be living below the $1.90/day interna- Over the longer-term, Namibia faces im- volumes, as new projects reach capacity. tional extreme poverty line in 2016, 18.8 portant challenges in diversifying the Responding to downward revision in percent in 2017, and 18.3 percent by 2018. economy and broadening economic op- revenue figures, the government expects Using the $3.1/day poverty line, 42.5 per- portunities. The economy remains heavily expenditure cuts averaging 1.7 percent cent of Namibians are expected to be poor dependent on mining, while limited de- of GDP per year over 2016 -2018, bring- in 2016, declining to 41.6 percent by 2018. mand for unskilled labor leads to concen- ing the deficit down to around 3 percent The on-going drought is expected to put a tration of labor in unproductive subsist- of GDP by 2018. Fiscal consolidation is damper on poverty reduction. The ence agriculture. Policy priorities for a welcome but may prove difficult to im- 2014/15 and 2015/16 harvests were the more inclusive economy include: i) im- plement, with a history of slippage worst in 80 years, prompting the Presi- proving access to and quality of second- against expenditure targets set under dent to declare in June 2016, the country ary, tertiary, and vocational education; successive MTEFs. to be in a state of emergency. Adverse and ii) addressing labor market rigidities. Inflation is expected to remain moderate, effects are expected for the rural poor at around 5 percent, as monetary who rely on subsistence farming as well TABLE 2 Namibia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2013 2014 2015 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 0.4 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 4.4 4.8 5.6 Inflation (Consumer Price Index) 5.6 5.4 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 10.6 7.6 6.7 Fiscal Balance (% of GDP) -3.9 -6.2 -6.6 -5.1 -4.9 -3.0 Debt (% of GDP) 24.2 24.6 35.9 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 19.5 19.2 18.8 18.3 Poverty rate ($3.1/day PPP terms) a,b,c 43.8 43.2 42.8 42.5 42.1 41.6 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 2009-NHIES. (b) P ro jectio n using annualized elasticity at regio nal level with pass-thro ugh = 1based o n GDP per capita in co nstant LCU. (c) P ro jectio ns are fro m 2013 to 2018. MPO 253 Oct 16