Country Report Namibia January 2009

Outlook for 2009-10

• It is unclear whether the president, Hifikepunye Pohamba, will stand for a second term of office in November 2009, but whoever stands as candidate for the South West Africa Peoples Organisation (SWAPO) is sure to win.
• Real GDP growth will decline to 1.8% in 2009, owing to the downturn in world economic growth and reduced production as a result of lower commodity prices.
• In 2010 the forecast upturn in global growth, higher diamond output and a further increase in uranium output will result in GDP growth of 3.7%.
• With the fall in world food and oil prices, average inflation is forecast to decline from 10.3% in 2008 to 7% in 2009 and 5.6% in 2010.
• The current-account surplus will widen to 4.4% of GDP in 2009, compared with an estimated 0.5% of GDP in 2008, driven by a smaller trade deficit, as lower oil prices will lead to a decline in imports.
• In 2010 the trade deficit will widen as imports will grow faster than exports, owing to demand stemming from the development of new uranium mines; as a result, the current-account surplus will narrow to 2.2% of GDP.

Monthly review

• The Bank of Namibia (the central bank) has reduced the bank rate by 50 basis points to 10%, matching a similar reduction in South Africas repo rate to 11.5%.
• By the end of September 2008 central government debt had risen by 8% year on year to US$1.53bn, mainly because of a 27% increase in foreign debt.
• Year-on-year inflation fell to 10.9% in December, taking average inflation for 2008 to 10.3%, its highest level for six years; inflation is now falling, owing to lower world food and fuel prices.
• Namdeb is working on plans to reduce diamond production in response to the fall in demand resulting from the world economic downturn. Of the small producers, DFI has suspended activities, but Samicor is continuing operations.
• The current-account balance in the first three quarters of 2008 was just US$60m, compared with US$719m in 2007; this was mainly because of a sharp rise in imports, caused partly by high world prices for fuel and food.
• Foreign-exchange reserves fell by 12% between end-July and end-September 2008 to US$1.4bn, possibly because of slowing export growth; however, reserves were still 65% higher than 12 months previously.
• Namibias external debt stood at N$6.78bn (US$816m) at end-September 2008, 12% higher in local-currency terms than 12 months previously, mainly as a result of government borrowing to finance infrastructure developments.

This report covers the following industry codes:
SIC Code: 49;10
NAICS Code: 22;212