Economic outlook update December 2020
Global and regional outlook
Based on the latest IMF’s World Economic Outlook (WEO) for October 2020, the global economy is expected to contract during 2020, with an improved projection for 2021.
The world economy is estimated to contract by 4.4% in 2020, and to recover to a growth rate of 5.8% in 2021.
The estimated 4.4% contraction in the global economy is an upward revision when compared to a deeper contraction of 4.9% published in the June 2020 WEO update.
The slight improvement was mainly in line with better-than-anticipated growth outturns in advanced economies because of the scaling back in Covid-19 induced lockdowns, coupled with signs of an overall stronger recovery during the third quarter of 2020.
During the fourth quarter of 2020, however, the second wave of Covid-19 infections resulted in further lockdowns in major economies, which may delay a robust global recovery projected for 2021.
Outputs in both the Advanced Economies (AEs) and Emerging Market and Developing Economies (EMDEs) are expected to contract during 2020.
AEs are expected to contract by 5.8%, while EMDEs are expected to contract by 3.3% in 2020. Output in sub-Saharan African (SSA) countries is estimated to decline by 3% this year.
SSA economies are further exposed to various downside risks, which pose threats to their prospects of recovery. These risks include lower commodity prices, rising debt levels and inadequate supply of energy and water. Risks to the global outlook are largely related to the duration and direction of the Covid-19 pandemic with its associated travel restrictions and lockdowns, especially given the second wave of infections.
Domestic Economic Outlook
The Namibian economy is expected to record the largest contraction in its recent history, brought about by the devastating impact of the Covid-19 pandemic. The domestic economy is projected to contract by 7.3% in 2020 and to recover by 2.6% and 3.2% in 2021 and 2022 respectively.
The steep contraction in 2020 is driven by sharp declines in hotels and restaurants, mining, transport and storage, manufacturing, wholesale and retail trade and construction.
The improved growth projected in 2021 is expected in both the primary, secondary and tertiary industries, particularly uranium mining and beverages as well as wholesale and retail trade.
The latest growth projection for 2020 represents an upward revision when compared to the August 2020 Economic Outlook, largely due to better performances in primary industries. The latest overall growth estimate of -7.3% for 2020 represents a slight improvement from -7.8% published in the August 2020 Economic Outlook. Year-to-date information about economic activity for 2020 so far suggests that estimated contractions in agriculture, forestry and fishing and mining and quarrying are likely to be less severe than initially anticipated.
Risks to domestic growth are currently dominated by uncertainty regarding the duration of the Covid-19 pandemic. Risks are linked to ongoing travel restrictions and lockdowns in major economies, exacerbated by the second wave of coronavirus infections. In the medium term, however, such risks may reduce following news of effective vaccines being found.