PSG Wealth Namibia forecasts a 3.8% gross domestic product (GDP) growth for the domestic economy this year but anticipates slower growth of 2.2% next year.
PSG based the projection on its analysis of global headwinds that are poised to put the brakes on Namibia’s exports.
“We forecast real GDP growth to slow from 3.8% (previously 3.1%) in 2023 to 2.2% in 2024 amid global headwinds which will put a brake on exports,” PSG says.
This comes after the Bank of Namibia Economic Outlook for August 2023 projected the domestic economy to grow by 3.3% in 2023 and by 3.0% in 2024.
PSG Wealth said the adverse impact of higher domestic interest rates on consumption is expected to become increasingly noticeable in the quarters to come.
Furthermore, PSG forecasts that diamond production growth could start to moderate due to the continued decline in global rough diamond prices since March 2022.
The external deficit is another area of concern, as PSG Wealth predicts marginal growth in 2024 while anticipating that both merchandise exports and revenue from the Southern African Customs Union will also experience a slowdown over the same period.
“The steady decline in rough diamond prices, which has been ongoing since March 2022, primarily due to weaker private consumption growth in the primary diamond-consuming markets of the United States and China,” PSG said.
PSG notes that merchandise imports will face upward pressure from increased average global oil prices next year.
“We forecast the average Brent crude oil spot price will rise by 1.7% to US$87.10 pb (per barrel) in 2024. Therefore, we anticipate a slight widening of the goods trade shortfall in 2024,” the firm explains.
Despite these economic challenges, PSG noted that the strong performance in the first half of 2023 has been driven by the exploration of Namibia’s oil and critical mineral resources, increased mining activity, wholesale and retail sales, and transport services.
This performance prompted PSG to raise its 2023 economic growth forecast to 3.8%, up from the previous estimate of 3.1%.
On inflation, PSG highlighted that the short-term outlook has moderately worsened.
“Our short-term inflation outlook has worsened moderately due to recent increases in our global fuel and food price assumptions. We project inflation will moderate from 6.1% in 2022 to 5.7% in 2023 and 5.1% next year,” PSG predicts.
PSG anticipates a 25-basis point reduction in the central bank’s policy rate to 7.50% in the second half of 2024.
On the fiscal front, PSG Wealth has predicted the narrowing of the budget deficit as a percentage of GDP, from 5.1% in the 2022/23 fiscal year to 4.1% in the 2023/24 fiscal year, dropping further to 4.0% the following fiscal year.
This comes as the World Bank forecasts that Namibia’s economic growth will slow to 2.8% in 2023, down from 4.6% in 2022.
This is slightly lower than the International Monetary Fund’s (IMF) projection of 3.2% growth for Namibia this year.
The World Bank’s Africa’s Pulse report attributes the slowdown to “relatively high inflation and monetary tightening and lower growth in South Africa and Europe.
