BoN upbeat about the domestic economy

Diamond mining expected to drive growth
The central bank revised Namibia's real GDP growth projection for 2022 from 3.2% to 3.9%.
Phillepus Uusiku
Taking inflation into account, the Bank of Namibia (BoN) expects the domestic economy to grow by 3.9% in 2022, an improvement when compared to 3.2% initially projected in August 2022.

In 2021, Namibia recorded real gross domestic product (GDP) growth of 2.7%, after a massive contraction of 8.5% in 2022, according to the Namibia Statistics Agency (NSA).

During the first quarter and second of 2022, the domestic economy grew by 6.5% and 5.6%, respectively. The third quarter GDP figures are expected to be released next week Friday by NSA.

The central bank expects growth in 2022 to be mainly driven by robust growth for diamond mining, mainly on higher production volumes up to date, as well as sustained growth for most industries in the secondary and tertiary sectors.

“Risks to domestic growth are predominantly in the form of monetary policy tightening globally and high costs of key import items that are likely to persist for a long time,” BoN said.

Furthermore, the war between Russia and Ukraine is likely to continue for longer and so is the high prices for affected commodities for which Namibia is a net importer. Other domestic risks include water supply interruptions that continue to affect mining production at the coast, potential spillover of electricity cuts in South Africa to Namibia, and uncertainty about the effects of climate change going forward, the BoN added.

2023

Going forward, growth is expected to slow down to 2.7% and 2.4% in 2023 and 2024, respectively, Bon said.

Meanwhile, Finance Minister Iipumbu Shiimi in his mid-term budget review statement projected the Namibian economy to grow by 2.8% in 2022, before expanding further by 3.4% in 2023.

“The projected growth in 2022 will be anchored by output from primary industries and tertiary industries on the back of a strong recovery in mining activities, supported by buoyant performance in the diamond sub-sector and a return to growth for most of the tertiary industries,” the budget statement reads.

Potential spillover of electricity cuts in South Africa to Namibia is one of the risks that the central bank pointed out. Fin24 recently reported that South Africa's economy grew faster than expected in the third quarter – avoiding a recession.

The economy grew by 1.6% in the three months to end-September after shrinking by 0.7% in the second quarter, which was affected by the KwaZulu-Natal floods.

The finance, real estate and business services industry – the largest industry in South Africa – grew by almost 2%. The manufacturing industry grew by 1.5%, with seven of the ten manufacturing divisions reporting growth in the third quarter. Manufacturing of motor vehicles, parts and accessories and other transport equipment division made the largest contribution in the third [email protected]