Namibia Business Forecast Report

Tests For The Ruling Party We believe Namibia's South West Africa People's Organisation (SWAPO), which has long dominated Namibian politics, will easily win in the upcoming November 2009 election. That said, the party is facing more challenges to its dominance than in previous elections, in the form of an embarrassing corruption trial and an economic downturn, and we believe this could be the best year yet for the marginalised opposition. With regards to the economy, first quarter data revealed the downturn was extremely severe, and we have revised down our real GDP growth forecasts accordingly. However, going into Q409, and 2010, there are signs that the economy may begin to bounce back, and combined with indications that inflation has bottomed out, we now believe the Bank of Namibia has reached the end of its easing cycle, and will hold its policy interest rate from now until the end of 2010.

Politically, the government is also facing a test of its anti-corruption resolve with an investigation into bribery of a public official (indirectly) reaching all the way to the president of China's son. With China one of, if not the most, important foreign donor to Namibia, the government will have to tread carefully to avoid damaging relations with Beijing - which blocked internet searches for 'Namibia' after the investigation broke - and keep sceptics confident that the country will allow corruption investigations to proceed unhindered. Whatever the outcome of the case, it will play a significant role in informing perceptions of corruption in Namibia.

On the economic front, we now see a deeper contraction of 2.2% in 2009 (compared with our previous forecast of -1.0%), though this will be followed by a slightly swifter recovery of 3.4% in 2010 (up from our earlier estimate of 2.4%) as mining output - which accounted for much of the decline in headline growth - quickly recovers. This dynamic is mirrored in the balance of payments, where we see a rapid widening of the balance of payments deficit in 2009, as exports drop precipitously, followed by an equally fast narrowing of the deficit in 2010, again driven by a rebound in exports.

In this quarter we have also included a special report on the distribution of income in Namibia, which is one of the most unequal in the world.

With an abundance of natural resources - notably diamonds, uranium, zinc and copper - the country can expect to see an increase in FDI focused on related projects after the global recession bottoms out. However, the government is keen to reduce its dependency on primary industries and, with its spectacular scenery and safari, Namibia is positioning itself as a high-end tourist destination. The country has well-developed infrastructure by sub-Saharan African standards, but further investment, particularly in transportation, is slated for this year. While the country continues to make significant progress against corruption, graft remains a problem.