Economic growth forecast revised upwards
By BoN from 2.7% to 3% in 2023
Risks to domestic growth are predominantly in the form of monetary policy tightening globally and high costs of key import items.
The Bank of Namibia (BoN) revised the economic growth forecast for 2023 upwards to 3%, from 2.7% initially projected in December 2022. Economic growth forecast for 2022 has also been revised upwards from 3.9% to 4.1%.
“The improved growth for 2022 is largely based on higher production volumes from the diamond mining sector.”
According to the Namibia Statistics Agency (NSA), the domestic economy expanded by 6.6%, 6% and 4.3% during the first, second and third quarter of 2022, respectively. The fourth quarter figures for 2022 are expected to be released at the end of March.
Meanwhile, the Ministry of Finance expects the Namibian economy to grow by 4% in 2022 and moderate to 3.2% in 2023.
In addition, PSG forecast real gross domestic product (GDP) growth to moderate to 2.6% in 2023 from 3.9% in 2022,” PSG said.
Simonis Storm forecast a 5.1% and 3.7% GDP growth for 2022 and 2023, respectively.
“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 remain for the entire forecast period,” the Bank of Namibia said.
Furthermore, the war between Russia and Ukraine is likely to continue for longer than expected, and so are the high prices for affected commodities for which Namibia is a net importer, including fuel, wheat, and cooking oil, the central bank added.
In February, the BoN increased the repo rate by 25 basis points from 6.75% to 7%, hiking the prime lending rate from 10.5% to 10.75%. Inflation averaged 6.1% in 2022 and came in at 7% in January 2023.
Looking at trade, Namibia’s N$10 billion import bill in January 2023 was mainly driven by petroleum oils, with a share of 32.4 % of the nation’s total import value. Petroleum oils were mostly sourced from Saudi Arabia, Malaysia and Singapore, according to NSA.
Exchange rate
According to Simonis Storm, the weaker Rand exchange rate is likely to keep the import bill inflated.
A depreciation in the local currency makes imports expensive and exports cheap, while an appreciation makes imports cheap and exports expensive.
Moreover, the ministry of mines and energy expect oil prices to increase due to undersupply and a rebound in demand. A shortage in the market causes prices to increase.
“The International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC) have both raised their 2023, demand outlooks due to expectation of a Chinese recovery,” the ministry added. China is one of the world’s biggest economies.
On the supply side, Fin24 reported that “from February 5, the European Union, the G-7 and its allies will attempt to impose a cap on the price of Russia’s fuel exports — the latest punishment for its invasion of Ukraine. The European Union will have to replace about 600 000 barrels a day of diesel imports, and Russia will need to find new buyers for those supplies, store the fuel on ships, or cut production at its refineries.”
“Russian Federation, which has been hit with an embargo by the European Union against its oil industry, has announced a cut in production of about 500 000 barrels per day for the month of March,” the ministry said.
Effective 1 March 2023, the ministry announced an increase in the price of petrol by N$1.50 per litre, while the price of diesel remained unchanged.
The price of petrol at Walvis Bay, which is the port of entry, is N$19.75 and N$20.65 per litre for diesel. –[email protected]
“The improved growth for 2022 is largely based on higher production volumes from the diamond mining sector.”
According to the Namibia Statistics Agency (NSA), the domestic economy expanded by 6.6%, 6% and 4.3% during the first, second and third quarter of 2022, respectively. The fourth quarter figures for 2022 are expected to be released at the end of March.
Meanwhile, the Ministry of Finance expects the Namibian economy to grow by 4% in 2022 and moderate to 3.2% in 2023.
In addition, PSG forecast real gross domestic product (GDP) growth to moderate to 2.6% in 2023 from 3.9% in 2022,” PSG said.
Simonis Storm forecast a 5.1% and 3.7% GDP growth for 2022 and 2023, respectively.
“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 remain for the entire forecast period,” the Bank of Namibia said.
Furthermore, the war between Russia and Ukraine is likely to continue for longer than expected, and so are the high prices for affected commodities for which Namibia is a net importer, including fuel, wheat, and cooking oil, the central bank added.
In February, the BoN increased the repo rate by 25 basis points from 6.75% to 7%, hiking the prime lending rate from 10.5% to 10.75%. Inflation averaged 6.1% in 2022 and came in at 7% in January 2023.
Looking at trade, Namibia’s N$10 billion import bill in January 2023 was mainly driven by petroleum oils, with a share of 32.4 % of the nation’s total import value. Petroleum oils were mostly sourced from Saudi Arabia, Malaysia and Singapore, according to NSA.
Exchange rate
According to Simonis Storm, the weaker Rand exchange rate is likely to keep the import bill inflated.
A depreciation in the local currency makes imports expensive and exports cheap, while an appreciation makes imports cheap and exports expensive.
Moreover, the ministry of mines and energy expect oil prices to increase due to undersupply and a rebound in demand. A shortage in the market causes prices to increase.
“The International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC) have both raised their 2023, demand outlooks due to expectation of a Chinese recovery,” the ministry added. China is one of the world’s biggest economies.
On the supply side, Fin24 reported that “from February 5, the European Union, the G-7 and its allies will attempt to impose a cap on the price of Russia’s fuel exports — the latest punishment for its invasion of Ukraine. The European Union will have to replace about 600 000 barrels a day of diesel imports, and Russia will need to find new buyers for those supplies, store the fuel on ships, or cut production at its refineries.”
“Russian Federation, which has been hit with an embargo by the European Union against its oil industry, has announced a cut in production of about 500 000 barrels per day for the month of March,” the ministry said.
Effective 1 March 2023, the ministry announced an increase in the price of petrol by N$1.50 per litre, while the price of diesel remained unchanged.
The price of petrol at Walvis Bay, which is the port of entry, is N$19.75 and N$20.65 per litre for diesel. –[email protected]
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