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Namibian Economy to grow by 1.5%, says Reserve Bank Governor

Bank of Namibia Governor Ipumbu Shiimi

The Bank of Namibia (BoN) has predicted economic growth of 1.5% this year; however, a key sector such as agriculture is expected to remain in contraction. The agriculture sector also includes forestry and fishing, and it is projected to contract again by 0.1%. These figures were provided by the BoN as part of its economic outlook for February that was released last week.

The Bank’s governor, Ipumbu Shiimi, said the high contraction experienced in 2019 is in line with extremely poor rainfall, which contributed to fewer hectares planted, as farmers weigh the risk for their investments. 

“The drought similarly affected livestock, as it resulted in large numbers of animal deaths. It is important to note that the estimated contraction of 12.3% is not comparable to 17.5 % published in the August 2019 Economic Outlook because agriculture now includes fishing, which was a separate sector before,” he noted. 

The Namibian economy is expected to recover in 2020 after it remained weak in 2019. Real GDP is expected to grow by 1.5% and 1.4% in 2020 and 2021, respectively, which is a recovery from an estimated contraction of 1.9% in 2019. 

“The 1.9% contraction is a downward revision from a 1.7% contraction published in the August 2019 Economic Outlook. The downward revision of the 2019 growth was largely based on poor performances amongst primary and secondary industries – worse than earlier expected. 

These industries include agriculture, forestry and fishing, diamond mining and uranium mining, as well as electricity and water,” Shiimi elaborated. 

Key risks to domestic growth include unpredictable rainfall conditions, a slow recovery in international commodity prices and expected slow demand from key trading partners and the impact of the coronavirus. 

He pointed out that risks to domestic growth include the possibility of another drought and persistently low international prices for uranium and copper, which may cause affected mines to either reduce or cease production. “The outbreak of the coronavirus in China has already halted travel and transportation between Namibia and China – and this may remain for most of 2020, and it is expected to have a major impact business activity between the two countries, especially through sectors such as transport and tourism,” said the governor. 

The primary industry at large is expected to moderately recover in 2020, following an estimated decline in 2019. Primary industries are estimated to have contracted by 10.4% in 2019, which is significantly lower than the 8.4% growth recorded in 2018. 

Also, he said, the mining industry is estimated to have contracted by 9.3% in 2019, largely reflecting lower volumes produced in the diamond and uranium subsectors. 
In 2020, primary industries are expected to recover moderately to 2.6%, mainly on account of projected improvement in the mining sector. 

The diamond mining sector is forecasted to expand by 5.3% in 2020, following an estimated contraction of 16.3% in 2019. 

Shiimi said the lower value-added in diamond mining in 2019 was mainly on account of reduced volumes of diamonds produced compared to the previous year, which is largely attributed to operational issues, where the main mining vessel went in for maintenance in the second quarter of 2019. Growth in uranium mining is expected to increase to 5.9% in 2020, following an estimated contraction of 1.8% in 2019. The projected improvement in growth for 2020 is in line with plans to increase production by all mines in operation. 

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