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Namibia Country Risk Report Q2 2016

  • January 2016
  • -
  • Business Monitor International
  • -
  • 39 pages

Core Views

Namibia’s economy will face dual headwinds of low global demandand prices for its key commodities exports. This will have knock-onimplications for investment in the mining sector. We forecast growthto slow from 3.9% in 2015 to 4.1% in 2016 and pick up slightly to4.4% in 2017.The landslide victory for president-elect Hage Geingob and theruling SWAPO in Namibia’s general elections on November 28,2014 augurs for broad political stability and a pro-business economicagenda.

The result means that SWAPO will expand on its two thirdsmajority in the national assembly. Hopes for a shift towards a moreinclusive electoral landscape continue to prove elusive.Namibia’s fiscal position will deteriorate further in the next two yearsas a contraction in the mining sector – which accounts for around58% of export value – will slash tax income. We see little scope fora near-term pull-back in spending, given the government’s mediumterminclusive growth plans and therefore forecast a deeper fiscaldeficit in FY 2016/17, of 6.0% from a deficit of 4.9% in FY2015/16.Major Forecast ChangesWe have revised down our real GDP growth forecast for 2015 and2016, from 5.3% in 2015 and 5.5% in 2016 to 3.9% and 4.1% in2015 and 2016, respectively.We have revised our government budget balance forecast from adeficit of 10.3% as a percentage of GDP to 4.9% in FY2015/16 aswell as from a deficit of 11.2% to 6.0% in FY2016/17.

Table Of Contents

Namibia Country Risk Report Q2 2016
Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Fixed Investment To Outperform Private Consumption8
The outlook for Namibia's economy for the next few years is positive and we expect relatively stable real GDP growth of 41% in 2016
and 44% in 2017 Fixed investment growth will increase due to new regulations of minimum investment into unlisted assets
GDP By Expenditure Outlook 8
TABLE: GDP GROWTH FORECASTS 9
TABLE: PRIVATE CONSUMPTION FORECASTS 9
TABLE: GOVERNMENT CONSUMPTION FORECASTS 9
TABLE: FIXED INVESTMENT FORECASTS 9
TABLE: NET EXPORTS FORECASTS9
Fiscal And Public Debt Outlook 10
Ministry Of Finance Improves Fiscal Transparency10
The publication of the Mid-Year Budget Review Policy Statement in November 2015 indicates a continued focus on infrastructure
development and social spending That said, with revenue growth set to remain subdued in FY2016/17, these spending commitments
will keep the fiscal balance well in the red
Structural Fiscal Position 11
External Trade And Investment Outlook 12
Namibia's Rising Debt Will Increase Debt-Servicing Costs12
Namibian debt has increased by over N$1bn dollars since the beginning of 2015 There will be increased debt-servicing costs following
the rise in debt levels due to the depreciating currency and the possibility of the US Federal Reserve increasing interest rates
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES 12
Outlook On External Position 13
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE 14
Monetary Policy 15
Interest Rate Increases Expected In 201615
We expect rate hikes of 25bps by Q216 leading to 675% after the Bank of Namibia's MPC left the benchmark lending rate unchanged
at 65% in December, a decision mainly based on the deceleration of household instalment credit growth Furthermore, forecast inflation
will see an uptick from an average of 35% in 2015 to 42% in 2016 due to expected increases in food prices
TABLE: TOP 5 GOODS EXPORTS IN 201415
TABLE: TOP 5 GOODS IMPORTS IN 201415
Monetary Policy Framework 16
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 42
%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
President Geingob To Focus On Poverty Eradication22
President Geingob will continue the battle against poverty eradication with the help of a solidarity wealth tax, the Mass Housing Project
and education expenditure We believe that poverty will decrease over next five years with the continued dedication of the President and
joint effort by fellow Namibians
TABLE: POLITICAL OVERVIEW 22
Long-Term Political Outlook 23
Stability Likely To Prevail Over The Coming Decade23
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 RISK 28
Trade Procedures And Governance 29
TABLE: TRADE PROCEDURES - DOCUMENTS REQUIRED29
TABLE: DURATION AND COST OF TRADE PROCEDURES29
TABLE: SUB-SAHARAN AFRICA - TRADE PROCEDURES AND GOVERNANCE RISK 30
Vulnerability To Crime 31
Chapter 5: BMI Global Macro Outlook 35
Global Macro Outlook 35
Unfinished Business In 201635
TABLE: GLOBAL ASSUMPTIONS35
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %36
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 36
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %37
TABLE: NAMIBIA - MACROECONOMIC DATA and FORECASTS39

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