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Namibia Country Risk Report Q3 2016

  • April 2016
  • -
  • Business Monitor International
  • -
  • 47 pages

Core Views

Namibia’s economy will face dual headwinds of low global demand and prices for its key commodities exports. This will have knock on implications for investment in the mining sector. We forecast a minimal uptick in growth from 3.9% in 2015 to 4.1% in 2016 and again to 4.4% in 2017. The landslide victory for president-elect Hage Geingob and the ruling SWAPO in Namibia’s general elections on November 28 2014 augurs for broad political stability and a pro-business economic agenda. The result means that SWAPO will expand on its two thirds majority in the national assembly. Hopes for a shift towards a more inclusive electoral landscape continue to prove elusive. Namibia’s fiscal position will remain in the red until FY2020/21 owing to lower demand for the countries commodities – the mining sector accounts for around 60% of export value – which will slash tax income. We see little scope for a near-term pull back in spending given the government’s medium term inclusive growth plans and therefore forecast a deeper fiscal deficit in FY2016/17 of 6.2% from a deficit of 5.2% in FY2015/16. Major Forecast Change We have revised down our real GDP growth forecast for 2015 and 2016, from 5.3% in 2015 and 5.5% in 2016 to 3.9% and 4.1% in 2015 and 2016, respectively.

Table Of Contents

Namibia Country Risk Report Q3 2016
Executive Summary 5
Core Views5
Major Forecast Change5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Low Commodity Prices Will Keep Recovery Subdued8
We forecast a steady recovery in economic growth for Namibia from 2016 Rising urbanisation will fuel private consumption levels which
will be a driver of economic growth together with increased investment in infrastructure development However, a slow recovery in
commodity prices will continue to act as a dampener and weigh on the overall growth rate over the coming years
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS9
TABLE: PRIVATE CONSUMPTION FORECASTS9
TABLE: GOVERNMENT CONSUMPTION FORECASTS9
TABLE: FIXED INVESTMENT FORECASTS10
TABLE: NET EXPORTS FORECASTS10
Fiscal Policy And Public Debt Outlook 10
Dwindling Revenues To Spur Fiscal Consolidation10
The Namibian government will implement fiscal consolidation over FY2016/17 owing to a decline in overall revenues and rising debt
concerns, as export demand remains subdued Nonetheless, significant funding will be directed towards infrastructure development and
social expenditure
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES12
External Trade And Investment Outlook 13
Growing Concerns Over Current Account Deficit13
A deteriorating trade balance will create a setback in the improvement of Namibia's current account deficit over the next two years
leading up to 2018 The deterioration in the trade balance will stem from lower demand for commodity exports and accelerating imports
towards infrastructure development
Outlook On External Position 14
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE15
TABLE: TOP 5 GOODS EXPORTS IN 201515
TABLE: TOP 5 GOODS IMPORTS IN 201415
Monetary Policy 16
Rate Hikes Will Follow Regional Hawkish Stance16
Further interest rate hikes are expected after the Bank of Namibia increased the repo rate by 25 basis points in February 2016 in order
to align interest rates with the Common Monetary Area As a result, private sector credit growth and household instalment credit will
continue decreasing On the contrary, inflationary pressures will rise stemming from higher food prices due to the ongoing drought
Monetary Policy Framework 18
Chapter 2: 10-Year Forecast 19
The Namibian Economy To 2025 19
Resource Powered Growth19
Thanks to the country's strong primary sector, we expect growth to prove relatively robust in the long run, averaging around 49
%annually over 2016 to 2025 With a stable political environment, the main risks are the limited size of the domestic market, rising income
inequality and depressed global demand for the country's primary export - diamonds
TABLE: LONG-TERM MACROECONOMIC FORECASTS19
Chapter 3: Political Outlook 21
SWOT Analysis 21
BMI Political Risk Index 21
Domestic Politics 22
Politicisation Of Land And Housing Issues To Persist22
The redistribution of land remains a challenging reform for the Namibian government, which is looking to amend two Land Reform Acts
in order to alleviate expropriation pressures A reassessment of the government's Mass Housing Programme is also likely to improve its
chances of successful implementation, which would help to ease housing price growth around the country
TABLE: POLITICAL OVERVIEW 22
Long-Term Political Outlook 24
Stability Likely To Prevail Over The Coming Decade24
While Namibia's enormous income inequality poses some risks to political stability, we believe the population is likely to continue
supporting the South West Africa People's Organization (SWAPO) government for the next 10 years, ensuring broad political stability
and continuity
Chapter 4: Operational Risk 27
SWOT Analysis 27
Operational Risk Index 27
Operational Risk 28
TABLE: OPERATIONAL RISK28
Economic Openness 29
TABLE: TOP FIVE TRADE PARTNERS PRODUCT IMPORTS, 2007-201330
TABLE: FREE TRADE AGREEMENTS32
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES34
Availability Of Labour 36
TABLE: SUB-SAHARAN AFRICA - AVAILABILITY OF LABOUR RISK 37
TABLE: EMPLOYMENT BY SECTOR (‘000)38
TABLE: TOP SOURCE COUNTRIES FOR MIGRANTS INTO (‘000)39
Chapter 5: BMI Global Macro Outlook 43
Global Macro Outlook 43
Emerging Markets Nearing Inflexion Point43
TABLE: GLOBAL ASSUMPTIONS43
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %44
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 44
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %45
TABLE: MACROECONOMIC DATA and FORECASTS 47

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