July 14, 2024

Namibia’s economy rebounding as mining picks up but rising debt and coronavirus pose serious risks, IMF says

The International Monetary Fund (IMF) said on Monday real GDP in Namibia was expected to turn to positive in 2020 as the effects of last year’s drought fade and mining production picks up. However, rising public debt and the impact of the coronavirus on the global economy posed serious threats.

The latest assessment of the Namibian economy came after an IMF team led by Geremia Palomba, IMF mission Chief for Namibia, visited Windhoek between February 24 and February 28, 2020, to discuss recent developments and the economic outlook in the context of its regular surveillance activities.

“The economy is projected to return to positive growth this year. Real GDP contracted in 2019 and is expected to turn positive during 2020 as the impact of last year drought fades and mining production picks up. Absent structural reforms, growth would strengthen only gradually over the medium-term. Downside risks to this outlook include a decline in global growth as COVID-19 virus risks materialize, and possible lower-than-expected Southern African customs Union (SACU) revenue and fiscal slippages that would undermine the government’s effort to stabilize public debt dynamics.

“With public debt rising, the authorities need to continue fiscal adjustment policies to stabilize public debt over time and balance the adjustment with broader reforms to support growth,” Geremia Palomba said at the end of the mission.

Palomba said there was a need to jumpstart structural reforms to reignite growth and boost job creation, adding that It was also important to improve the efficiency of the economy, including by streamlining business regulations, strengthening market operations of key public enterprises, removing obstacles that contribute to high electricity and transportation costs, and better aligning wage dynamics in the public sector and in the economy to productivity trends. 

Over time, it would also be important to remove obstacles to exports and address shortages of skilled workers.

“The financial sector remains sound despite weak growth having started to negatively affect banks’ performance. Reforms to improve the non-bank regulatory and supervisory framework are advancing, although at a slow pace,” Geremia Palomba said.

The 2020 Article IV consultation—annual review of the economy—with Namibia is planned to take place before the end of the year. 

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