Fitch’s crystal ball
Jo-Maré Duddy - Namibia’s gross domestic product (GDP) per capita is set to more than double in the decade to 2027, Fitch Solutions forecasts in its latest Country Risk Report, released on Wednesday.
The agency expects a GDP per capita of US$10 889 by 2027, up from an estimated US$5 152 last year. Namibia’s population is expected to grow by nearly 22% to about 3.08 million.
For this year, Fitch forecasts a GDP per capita of US$5 462, around N$84 000 at yesterday’s exchange rate.
In the executive summary of its report, Fitch says the domestic economy will recover over the coming years as the Husab mine moves towards peak production, making Namibia one of the world’s largest uranium producers. However, while the economy will see a significant ramp-up in mining output, “high household indebtedness will limit growth in private consumption”.
The agency expects real GDP growth to increase from the Namibia Statistics Agency’s official -0.95% in 2017 to 5.6% in 2027. It projects that growth will breach the 5%-level in 2020 and start fluctuation between 5.6% and 5.7% from 2021.
For 2018, Fitch revised its growth forecast down from 4.5% to 2.5% “on the back of weak performance in the construction sector and headwinds to government consumption”. As a result, its forecast for the fiscal deficit was adjusted from 4.1% of GDP to 5%.
The Bank of Namibia (BoN) forecast growth of 0.6% in its Economic Outlook, released in July.
Fitch expects the overall inflation rate for 2018 to come in at 5.5% and stay there next year. From 2020 until 2027 it forecast an annual rate of 5.0%.
On the interest rate front, Fitch says will hold rates this year as “inflation has remained tempered over recent months”. The South African Reserve Bank will also maintain rates this year, which “will encourage the BoN to hold rates in order to maintain its currency peg to the rand”.
Fitch identifies three key risks to the economy: its size, its reliance on agriculture and the reliability of its data.
“Namibia's small, open economy is highly exposed to events on the world stage. While we have incorporated the ongoing global malaise into our economic forecasts, if the situation abroad deteriorates (or conversely, improves) more than we anticipate, it would affect Namibia's overall growth,” Fitch says.
The economy remains closely tied to agriculture, the agency says. “… weather poses substantial risks, as illustrated by the ongoing drought, which has threatened yields and food security. Changing weather conditions will affect growth, inflation and trade.”
Fitch continues that Namibia's statistics have been “subject to multiple revisions and this weighs on overall data for the country”.