Namibia Business Forecast Report Q3 2009

Publication Date	July 2009
Publisher	Business Monitor
Product Type	Report
Pages	55
ISBN Number	1758-5058
Product Code	BMI02929

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Summary

Ahead of the national election in November, the government of Namibia's budget for fiscal year 2009/10 attempts to prop up growth through an expansion of spending. While we believe the budget will further ensure re-election for the ruling SWAPO party, we do not believe it will avert a forecast 1.0% real GDP contraction in 2009. The contraction will be partially led by a major drop in exports.

Following Q408 data we have revised wider our forecast for the current account deficit, though we see the country returning to surplus in the coming years. Meanwhile, we see further interest rate cuts as the economy slows and inflation wanes.

On the political front, the government may be able to wring some political capital out of the fact that it has saved up a sizeable cash reserve that will ease the burden of deficit spending. While we believe the fiscal stimulus will not be as effective as the government is probably hoping, we also believe it will not hurt the economy or the ruling party's popularity. Indeed, public sector wage increases may boost private consumption, and infrastructure spending could prop up investment if projects are initiated promptly.

Meanwhile, worse-than-anticipated first quarter GDP figures from neighbouring South Africa have increased the downside risks to our forecast for Namibian real GDP growth. Despite the fact that the economies of Namibia and South Africa share some of the same vulnerabilities, we have maintained our forecast for a 1.0% real GDP contraction in Namibia, i.e. better than South Africa, on the back of more positive economic indicators. We expect the one-to-one peg of the Namibian dollar to the South African rand to hold, and further strength for the rand/dollar in the short term, though we remain bearish over the medium term.

With an abundance of natural resources - notably diamonds, uranium, zinc and copper - Namibia 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.

Content

Executive Summary
Muddling through
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Budget Won't Hurt Economy or Swapo
- Broadly Speaking, The Fiscal Year 2009/10 Budget Will Be Positive for The Economy, Though Perhaps Not as Effective at Combating The Global Downturn as The Government Hopes.
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Sticking with A 1.0% Gdp Contraction
- Leading Indicators Have LED US to Maintain Our Forecast for A 1.0% Real Gdp Contraction in Namibia during 2009, despite Poorer than Anticipated Q109 Growth Figures in Neighbouring South Africa, An Economy with Some Similar Characteristics to Namibia's.
- Balance of Payments
- Current Account Heading into Deficit
- Namibia Will Slip into A Large Current Account Deficit Forecast at 6.4% of Gdp in 2009, as Export Revenues Dry up and Import Tariff Revenues from The Southern Africa Customs Union Decline.
- Monetary Policy
- 150bps of Further Cuts Ahead
- after Cutting The Policy Interest Rate by 50bps to 7.50% in May, We Are Forecasting Another 150bps of Interest Rate Cuts over The Remainder of 2009, Bringing Rates down to 6.00%.
- Exchange Rate Policy
- Driven by Dollar Weakness
- with The One-to-One Peg between The South African Rand and The Namibian Dollar Set to Continue, We See The Potential for Further Short-Term Strength against The Dollar, Primarily Driven by Global Dollar Weakness.
Chapter 3: 10-Year Forecast
- The Namibian Economy to 2018
- Robust Growth Expected to 2018
- Thanks to The Country's Strong Primary Sector, We Expect Growth to Prove Robust in The Long Run - Notwithstanding A Three-Year Slump between 2008 and 2010 - Averaging 4.8% from 2011 to 2018.
Chapter 4: Special Report
- The Outlook for Global Banking
- Business Environment Ratings Outlook
Chapter 5: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Market Orientation
- Infrastructure
- Operational Risk
Chapter 6: BMI Global Assumptions
- Global Assumptions
List of Tables
- Table: Political Overview
- Table: Economic Activity
- Table: Balance of Payments
- Table: Monetary Policy
- Table: Exchange Rate Policy
- Table: Long -Term Macroecono Mic Forecasts
- Table: Loan-to-Deposit Ratios, Selected States
- Table: Loan Growth (% Chg Y-O-Y), Selected States
- Table: Commercial Banking Business Environment Ratings, Selected States
- Table: Bmi Business and Operational Risk Ratings
- Table: Bmi Legal Framework Ratings
- Table: Labour Force Quality
- Table: Middle East & Africa Annual Fdi Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Table: Global Assumptions
- Table: Global & Regional Real Gdp Growth
- Table: Commodities