2024: The year of expectations

Josef Kefas SheehamaAs 2024 draws to a close, Namibia’s economic outlook demonstrates tenacity in the face of adversity. This year highlighted the challenges of restoring stability in a rapidly changing world - from the Bank of Namibia (BoN) navigating rate cuts to an imbalanced economic recovery and a reassessment of oil discovery, green hydrogen and the election of the first female president.High tensions arose as political parties exerted tremendous pressure in the wake of Namibia’s general elections in 2024. However, setting Namibia’s economy on a more stable growth trajectory for everyone and accelerating climate action and sustainable development are both possible if we unlock significant, bold investments. The uncertainty surrounding Namibia’s economic prospects is exacerbated by factors such as rising interest rates and unemployment. To address these challenges, policymakers must focus on promoting growth and reducing inequality.FuelIn 2024, economic growth slowed. Consumers were less burdened by the 3% inflation rate. Namibia’s fuel consumption decreased by 5.0% year-over-year (y/y), totaling 289.1 million liters in the third quarter. The BoN reported a 9.8% decline in gasoline use and a 3.1% decrease in diesel consumption. In July, the price of fuel dropped by 80 cents per liter for petrol, 60 cents per liter for diesel (50 parts per million) and 70 cents per liter for diesel (10 parts per million). In September, gasoline and diesel prices dropped by N$1.20 and N$1.10 per liter, respectively. According to the BoN, the drought also impacted this trend, as fewer crops were planted and harvested, decreasing the need for fuel compared to normal circumstances. However, seasonal factors contributed to a 2.0% quarterly increase in total fuel consumption. A 1.0% decline was observed in the seasonally adjusted series.GDPAdditionally, the economy grew by 3.5% in 2024, with a projected growth rate of 4.0% in 2025. Namibia’s debt-to-GDP ratio dropped to 59.5%, indicating robust nominal GDP (gross domestic product) growth. The BoN asserts that fiscal conditions have improved. According to the Namibia Statistics Agency (NSA), nominal GDP increased by N$5.3 billion in the third quarter of 2024, from N$56.3 billion to N$61.6 billion. However, as real economic activity slowed in the manufacturing, electricity and water sectors, the secondary sector’s real output grew more slowly in the third quarter of 2024.Meanwhile, the construction sector’s output increased, driven by the rise in non-residential buildings and civil construction. Although growth in nominal residential property prices remained subdued, y/y increases in house price indices accelerated in recent months, fuelled by improved consumer confidence and recent interest rate reductions.UnemploymentIn 2024, the official unemployment rate worsened to 33.4%. Youth unemployment in Namibia is reported to be 39%. Both the number of discouraged job seekers and those classified as economically inactive have risen, contributing to the ongoing growth in the population of people who are not economically active. Addressing this societal issue requires a thorough analysis of the increased unemployment rate, which includes discouraged job seekers.InflationThe slowdown in global consumer price inflation has led to monetary policy easing in many countries in recent months. Domestic inflationary pressures have also eased in 2024, primarily due to a marked slowdown in fuel price inflation and the appreciation of the Namibian dollar. Consumer price inflation remained below the 4.5% midpoint of the inflation target, largely due to a notable easing in goods price inflation and a modest deceleration in services price inflation. During the first few months of 2024, most underlying inflation indicators remained low, reflecting weak consumer demand and the effects of the Namibian dollar’s gain in value. TradeImports totaled N$14.8 billion, up 20.5% from the previous month and 33.7% year-over-year from N$11.1 billion, while exports totaled N$9.0 billion, up 2.9% month-over-month and 17.4% year-over-year. This resulted in a N$5.8 billion trade deficit for the year under review. Namibia should consider enacting policies that encourage domestic manufacturing and reduce the country’s reliance on imports.SpendingFurthermore, there has been improved allocation and spending toward critical sectors such as education, healthcare and infrastructure. These improvements align with regional and international benchmarks. The attainment of economic prosperity in 2024 depended on the ability to formulate policies that drive open markets.PolicyLooking ahead, policymakers should collaborate and inspire action to fulfill Namibia’s commitment to leaving no one behind in the implementation of the Sixth National Development Plan (NDP6). It is essential to reflect on the previous NDPs shortcomings and develop well-researched, well-reasoned mechanisms that prioritise and synchronise activities to yield desired results and prevent the economy from faltering.NDP6 should leverage the flexibility inherent in the informal sector to integrate it into the formal economy, focusing on economic diversification, industrialisation, sustainable growth and addressing social concerns such as inequality, poverty and well-being.The industrial policy should be revisited or reformed to better incorporate the informal economy. The current industrial policy often neglects the informal sector or views it as a potential threat to the formal economy, rather than as an opportunity for inclusive structural transformation.EnergyAdditionally, Namibia’s oil discoveries are likely to generate substantial income for the government, significantly enhancing energy security in a country that has long depended on petroleum imports. Green hydrogen appears to be a reliable method for achieving full decarbonisation.Namibia’s agriculture sector also needs significant improvements and additional government funding. Developing knowledge and skills is a crucial cross-cutting strategy for achieving these objectives.Growth-orientated mindsetExciting technical advancements are taking place and Namibia must establish policies to position itself to take advantage of opportunities presented by the Fourth Industrial Revolution (4IR). Strengthening laws against cybercrime and reforming them is also essential.In conclusion, policymakers should focus on building resilience and maintaining a growth-oriented mindset amid a volatile economic backdrop. Understanding the economic outlook will help turn potential pitfalls into new opportunities. Josef Kefas Sheehama

2024: The year of expectations

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2024: The year of expectations

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