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Namibia Country Risk Report Q1 2017

  • October 2016
  • -
  • Business Monitor International
  • -
  • 43 pages

Core Views

Economic growth in Namibia will accelerate, though slowly in the months ahead. While new mining projects will boost export growth, fixed investment into Namibia will slow, as the country's new empowerment policies stifle private sector investment, providing headwinds to our otherwise upbeat outlook. The Bank of Namibia has reached the top of its hiking cycle, and will keep the policy rate on hold at 7.00% through end-2017. A shift by the South African Reserve Bank away from hawkish monetary policy and gradually falling inflation in Namibia will limit the impetus for further hikes by the BoN, especially in an environment of persistent sluggish economic growth. Rising mining production in Namibia and cut backs on non-essential spending will see Nambia's fiscal deficit narrow over the months ahead. That said, structurally lower receipts from the Southern African Customs Union will keep revenue growth subdued compared to recent years. Namibia's current account deficit will begin to narrow in the months ahead as uranium production rises in 2017, easing pressure on the country's financing needs. While Namibia's external position will improve over the years ahead, we expect government's proposals for the New Equitable Economic Empowerment Framework will weigh on capital flows to the country as investors remain cautious of the new bill. The empowerment agenda of Namibia's recently-established New Equitable Economic Empowerment Framework will remain a key concern for investors over the next 18 months. The framework's goal of increasing economic integration will ensure the ruling South West Africa People's Organization retains strong support from the wider population in the years ahead.

Table Of Contents

Namibia Country Risk Report Q1 2017
Executive Summary.................................................................................................................................. 5
Core Views.......................................................................................................................................................................................5
Key Risks.........................................................................................................................................................................................5
Chapter 1: Economic Outlook.................................................................................................................. 7
SWOT Analysis........................................................................................................................................................... 7
BMI Economic Risk Index.......................................................................................................................................... 7
Economic Growth Outlook........................................................................................................................................ 8
Headwinds Will Persist As Growth Recovers...............................................................................................................................8
Economic growth in Namibia will accelerate, though slowly in the months ahead. While new mining projects will boost export growth,
fixed investment into Namibia will slow as the country's new empowerment policies stifle private sector investment, providing headwinds
to our otherwise upbeat outlook.
GDP By Expenditure Outlook.................................................................................................................................... 9
TABLE: GDP GROWTH FORECASTS......................................................................................................................................................................9
TABLE: PRIVATE CONSUMPTION FORECASTS....................................................................................................................................................9
TABLE: GOVERNMENT CONSUMPTION FORECASTS.........................................................................................................................................9
TABLE: FIXED INVESTMENT FORECASTS............................................................................................................................................................9
TABLE: NET EXPORTS FORECASTS....................................................................................................................................................................10
Monetary Policy........................................................................................................................................................ 10
Sluggish Growth Will Keep Rates On Hold.................................................................................................................................10
The Bank of Namibia has reached the top of its hiking cycle, and will keep the policy rate on hold at 7.00% through end-2017. A shift by
the South African Reserve Bank away from hawkish monetary policy and gradually falling inflation in Namibia will limit the impetus for
further hikes by the BoN, especially in an environment of persistent sluggish economic growth.
Monetary Policy Framework.................................................................................................................................... 11
TABLE: MONETARY POLICY FORECASTS..........................................................................................................................................................12
Fiscal Policy And Public Debt Outlook.................................................................................................................. 12
Deficit To Narrow On Rising Mining Revenues And Fiscal Consolidation..............................................................................12
Rising mining production in Namibia and cut backs on non-essential spending will see the country's fiscal deficit narrow over the months
ahead. That said, structurally lower receipts from the Southern African Customs Union will keep revenue growth subdued compared to
recent years.
Structural Fiscal Position........................................................................................................................................ 13
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES FY2014/15..........................................................................................................13
TABLE: FISCAL AND PUBLIC DEBT FORECASTS...............................................................................................................................................14
External Trade And Investment Outlook................................................................................................................ 15
Uranium Exports Will Support Weaker Capital Inflows.............................................................................................................15
Namibia's current account deficit will begin to narrow in the months ahead as uranium production rises in 2017, easing pressure on the
country's financing needs. While Namibia's external position will improve over the years ahead, we expect government's proposals for
the New Equitable Economic Empowerment Framework will weigh on capital flows to the country as investors remain cautious of the
new bill.
Outlook On External Position.................................................................................................................................. 16
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE.........................................................................................................................................16
TABLE: TOP FIVE GOODS EXPORTS IN 2015.....................................................................................................................................................17
TABLE: TOP FIVE GOODS IMPORTS IN 2015......................................................................................................................................................17
TABLE: CURRENT ACCOUNT BALANCE FORECASTS.......................................................................................................................................18
Chapter 2: 10-Year Forecast................................................................................................................... 19
The Namibian Economy To 2025............................................................................................................................ 19
Resources Will Remain A Key Growth Driver............................................................................................................................19
Thanks to the country's strong primary sector, we expect growth to prove relatively robust in the long run, averaging 5.0 % 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 FORECASTS.....................................................................................................................................19
Chapter 3: Political Outlook................................................................................................................... 21
SWOT Analysis......................................................................................................................................................... 21
BMI Political Risk Index........................................................................................................................................... 21
Domestic Politics..................................................................................................................................................... 22
Empowerment Framework Will Receive Mixed Response........................................................................................................22
The empowerment agenda of Namibia's recently-established New Equitable Economic Empowerment Framework will remain a key
concern for investors over the next 18 months. The framework's goal of increasing economic integration will ensure the ruling South
West Africa People's Organization retains strong support from the wider population in the years ahead.
TABLE: POLITICAL OVERVIEW ............................................................................................................................................................................22
Long-Term Political Outlook................................................................................................................................... 23
Stability Likely To Prevail Over The Coming Decade................................................................................................................23
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 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 RISK.................................................................................................................................................................................28
Business Crime........................................................................................................................................................ 29
TABLE: BUSINESS RESPONSE TO RISK.............................................................................................................................................................29
Government Intervention......................................................................................................................................... 34
TABLE: BUSINESSES TAXES................................................................................................................................................................................35
TABLE: PERSONAL INCOME TAX.........................................................................................................................................................................36
Chapter 5: BMI Global Macro Outlook................................................................................................... 39
Global Macro Outlook.............................................................................................................................................. 39
Broad Recovery But Three Notes Of Caution.............................................................................................................................39
TABLE: GLOBAL FORECASTS, 2015-2020...........................................................................................................................................................39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %....................................................................................................................................40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %...................................................................................................................................41
TABLE: NAMIBIA - MACROECONOMIC DATA and FORECASTS...........................................................................................................................43

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