The Bank of Namibia (BoN) has slashed the country’s growth forecasts for 2022 and 2023, to 3.2 % and 2.9 % respectively.
The estimated growth of 3.2% in 2022 is a downward revision from the 3.4% growth rate forecasted in February 2022, but an improvement from the 2.4% registered in 2021, while the 2023 growth was lowered from 3.7% published in the February 2022 Economic Outlook update.
“This revision was largely based on the ongoing war between Russia and Ukraine and associated economic sanctions on Russia. The war led to supply shortages of various consumer products as well as some key production inputs, contributing to high inflation around the world. Most Central Banks reacted to increased inflation by raising policy interest rates at faster rates than initially anticipated, increasing the chance of having a global recession from 2023 onwards,” the central bank said in its August Outlook report released on Tuesday.
“The projected improvement in 2022 is mainly on account of anticipated better growth in the mining industry, particularly diamonds and gold. Most sectors under secondary and tertiary industries are expected to register positive, but low growth rates during 2022 and 2023.”
The uranium mining sector is expected to contract by 3.4% in 2022 before expanding by 7% in 2023 according to BoN.
“Uranium mining is expected to contract during 2022, largely due to water supply interruptions and other challenges. This sector was negatively affected by water supply interruptions during the first quarter of 2022 that led to mines reducing their production targets for the year. Other challenges faced by the sector include high costs of inputs such as fuel and sulphur, logistical delays importing chemicals and spare parts and labour issues that prevailed during the first quarter of 2022. Going forward, uranium mines are expected to increase production and take advantage of rising uranium prices.”
The construction sector is expected to remain in a contraction during 2022 and 2023 according to BoN estimates.
“The construction sector anticipated to contract by 6.8 percent and 2.2 percent in 2022 and 2023, respectively, following another contraction of 10.2 percent in 2021.”
The hotels and restaurants sector is projected to grow by 6.5% in 2022 on the back on increased arrivals.
The projected growth in 2022 is supported by increased international arrivals and higher room occupancies. Although a 6.5% growth projected for 2022 is a strong one, it represents a slowdown from 10.4% registered in 2021.”
The apex bank said monetary policy tightening around the world and high costs of key import items that are likely to persist for a long-time pose risk to domestic growth.
“Major Central Banks in the world are tightening monetary policies at faster rates than initially anticipated, the trend that could lead to a global recession. Furthermore, the war between Russia and Ukraine is likely to continue for some years and so are the high prices for affected commodities for which Namibia is a net importer. Other risks include water supply interruptions that continue to affect mining production at the coast and uncertainty about the effects of climate change going forward,” the BoN report said.
The apex bank’s latest GDP growth estimates still remain higher than Finance minister Ipumbu Shiimi’s projections that Namibia’s economy will only grow by 2.9% this year.
