Elevated global prices threaten import bill

Namibia’s import bill faces upward pressure in the short term due to a much higher average oil price in 2022 compared with last year, PSG Wealth said.

“Import costs are further exacerbated by higher global food and fertiliser prices in the wake of the Russian invasion of Ukraine in February, PSG added.

According to the Namibia Statistics Agency (NSA). Namibia’s import bill jumped to N$10.2 billion in May 2022, compared to N$6.6 billion recorded the corresponding month of 2021, an increase of N$3.6 billion.

Namibia’s imports were mainly driven petroleum oils, which was sourced from India, Bahrain, and Singapore.

Petroleum oils were followed by copper ores and concentrates and civil engineering and contractors’ equipment in third position.

On the other hand, the total value of exports during May 2022 stood at N$5.7 billion, compared to N$6.0 billion and N$4.0 billion registered in April 2022 and May 2021, respectively. Exports were mainly driven by diamonds and fish.

According to PSG, “increased fears of a global recession due to high inflation in developed markets and recurrent Covid-19 lockdowns in China have dampened our expectations for Namibian mining exports somewhat.”

“Nevertheless, we expect Namibian diamond production to benefit from the addition of a new mega diamond mining vessel, the Benguela Gem, to Debmarine's fleet and sanctions on the Russian diamond miner Alrosa.”

SACU

Considering non-goods trade, lower Southern African Customs Union (SACU) revenues will continue to be a drain on the current account balance this year, PSG pointed out.

“We project that higher goods imports will drive the external deficit wider in the short term. Based on our preliminary calculations, the current account deficit will widen to nearly 12.0% of Gross Domestic Product (GDP) in 2022, compared with our current forecast of 8.0% of GDP, from a deficit of 9.2% of GDP in 2021.”

“Looking further ahead, we expect the deficit will narrow over the medium term as mineral export volumes improve and the global oil price subsides. We still forecast that the oil market will enter a modest oversupply during late-2022, resulting in the global oil price subsiding gradually to US$96 pb by the end of 2023. The recovery in South African non-fuel goods imports in 2021 implies that SACU receipts will improve in 2023 according to the SACU revenue-sharing formula,” PSG [email protected]