Mining, renewables to drive 2022 growth – RMB Namibia

RMB Namibia maintains that increased mining output and investments in renewable energy are likely to continue to drive growth in Namibia.

“This helps us maintain our view that growth will continue to be driven by these factors. High frequency data already points towards improved mining performance,” RMB Namibia Economist, Ruusa Nandago said.

“The Composite Mining Index grew by 10% y/y compared to a contraction of 11.0% over the same period last year. The Diamond Mining Index grew by 26% y/y compared to a contraction of 16% over the same period in 2020. The Uranium mining Index grew by 10% y/y (5% in 2020) and the Gold Mining Index by 17% y/y (15% in 2020).”

Nandago, however, warns that rising inflation poses downside risk to growth as it will erode consumer purchasing power and increase input costs for businesses.

“We expect inflation to accelerate over the course of the year as the Russia-Ukraine conflict keeps both global oil and food prices higher. The oil price will filter through to domestic fuel prices given that Namibia is a net importer of oil. We also expect the higher fuel prices to filter through to goods and food inflation as 70% of imports in Namibia are transported via road,” she said.

““We believe retailers have limited room to absorb rising costs and will pass them through to the consumer through higher final prices.”

According to RMB Namibia massive disruptions over the past two years due to the COVID-19 pandemic resulted in business input costs increasing by 10% to 15% and forecasts further input costs should be expected this year as the global economy has not re-opened fully.

RMB Namibia Economist notes that the gradual recovery of Private Sector Credit Extension (PSCE) from its 2021 lows continues to point to weak household and business confidence as credit uptake remains low despite the low interest rate environment.

“We expect the rising interest rate environment to put further pressure on the ability for households and corporates to take up credit,” she said.

RMB Namibia forecasts growth to come in at 3% in 2022.

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