By Theo Klein
The consensus view is that a Trump 2.0 presidency will not be good for markets outside the US. Several key macroeconomic metrics at a global level will be affected: higher inflation and interest rates; a stronger US dollar; a weaker Chinese economy; and suppressed oil prices.
At a national level in Namibia, a slower interest rate cutting cycle; rising inflation pressures; higher foreign debt repayments; beneficial metal demand and prices; and lower oil prices are potential impacts.
Change in economic policy
Over the past two years, the main focus has been on global monetary policy (i.e. inflation and interest rate dynamics). We expect monetary policy to take the back seat over the short-term, with fiscal and trade policy becoming more top of mind. One of the reasons for this is that a significant portion of the world’s population headed to polling booths this year.
a result, we may see bigger shifts in fiscal policy from 2025 onwards as public plans are redrawn. This will be exacerbated in the US with the new administration being willing to pull other policy levers such as import tariffs to achieve higher public spending goals.
Countries that have sizeable trade surpluses with the US or who have relies heavily on China for inputs are likely to be hit hardest with tariffs. We believe that China, Mexico, Canada, the EU and India will be the biggest targets.
The initial impact of import tariffs on consumer prices could be small, but will likely build over time. Inflation will therefore be higher and more volatile over the medium-term but remain benign in 2025, leading central banks across the world to cut interest rates cautiously. A slower interest rate cutting path under Trump compared to a faster rate cutting cycle under Harris implies that the levels at which interest rates in advanced economies stabilise will be higher. This will also lead to US dollar strength.
The result is higher borrowing costs for African economies and inflationary pressures for countries importing goods and services from the US. A stronger US dollar also intensifies external debt repayment burdens for African countries with high levels of foreign currency denominated debt. This impacts Namibia as well, especially with the $750 million Eurobond which needs to be repaid in October next year. Naturally, a weaker dollar will increase the amount of local currency needed to repay the bond.
A new structure of commodity demand
A Trump presidency also means a weaker Chinese economy. Confidence in China’s ability to stimulate economic growth waned following persistently weak economic data in recent months. While recent monetary stimulus announcements caused us to raise our base metal and steel price forecasts, we think a considerable fiscal stimulus is required to lift commodity demand and prices. But the likelihood of a stimulus-induced commodity price boost is diminishing.
Chinese authorities are increasingly acknowledging the need for a consumption-led growth model whilst also focusing on its green transition. The Chinese economic transition from investment-led to consumption-led growth means that China will play a somewhat less significant role in global commodity demand. The lack of significant commodity price fluctuations following recent bad news on the Chinese economy is a case in point. That said, a structural change in China’s long run growth
model will alter the composition of the country’s commodity demand, with consequences for Africa. Our long-term baseline commodity forecasts capture the impact of consumption-led China growth model, alongside a global shift to greener technologies.
We expect declining demand for commodities used in construction (e.g. iron ore, steel, lumber, rubber and concrete) and fossil fuels (e.g. coal, gas and oil) towards a wide range of commodities used in agricultural products, renewable energy and green consumption (e.g. aluminium, lithium, cobalt, manganese, copper and biomaterials).
Our bearish outlook on industrial mineral and metal prices which would negatively impact non-oil commodity net exporters such as Zambia, Ghana, Côte d’Ivoire, the Democratic Republic of Congo (DRC), South Africa and Namibia. However, countries with natural reserves of minerals that feed into clean energy technologies are best positioned to benefit from this shift in commodity demand. These include Zimbabwe, Zambia, the DRC, Madagascar, Tanzania, Rwanda, Burundi, Mali and Namibia.
Energy outlook
One of the cornerstones of Trump’s energy policy in his first presidency was the expansion of American oil production through deregulation and granting more exploration licenses. These measures led to a surge in oil output, making the US the largest oil producer in the world in 2018. Trump is expected to allow additional oil exploration and drilling, further increasing American oil supply in the coming years.
Much of the impact on oil prices depends on how OPEC+ responds.
However, there are tentative indications that OPEC+ is moving away from its stance of defending oil prices by adjusting their output levels, towards a stance of defending its market share by other means. As a result of rising American oil production, we expect lower international oil prices over the medium term. We forecast oil prices to average $72.64 per barrel in 2025, $71.51 per barrel in 2026 and $72.05 per barrel in 2027 which is below the $80.37 per barrel we project for 2024.
Downward oil price pressures will disadvantage net fuel exporters such as Angola, Gabon, Nigeria and Mozambique. Conversely, they will benefit net fuel importers including Morocco, Senegal and Namibia. While Namibia would benefit from lower global oil prices, the stronger US dollar will likely offset this, fuelling domestic pump prices over the next two years years.
Namibia’s economic growth
Looser fiscal policy (i.e. increased government spending and lower tax rates) in the US will do little to spur growth in Namibia’s exports, given that the EU and Asia dominates the country’s export destinations.
However, targeted import tariffs in addition to already sub-par economic growth in the EU and China could weigh on Namibia’s growth potential. While new inflationary risks could delay interest rate cuts at Bank of Namibia, momentum in business activity could continue to support fiscal revenue collections at Ministry of Finance and increase public spending.
Following a lull in activity around mid-2024, we expect oil & gas exploration to pick up in Q4 2024 and Q1 2025. We have not yet added the development of any oil projects to our baseline forecast – we will do so once a final investment decision (FID) has been made. TotalEnergies should make an FID on its Venus project in early 2025.
The lack of progress in developing the green hydrogen sector in the face of progress elsewhere – Morocco and Mauritania – puts into question Namibia’s leading role in green hydrogen industry and the economic transformation stemming from it. We anticipate economic growth in Namibia to average roughly 3% over the next four years.
Namibia will be one of many nation’s going to the polls in 2024. The country is weeks away from a general election that may see the long-ruling Swapo lose its majority for the first time.
Should Swapo fall below 50% it may be forced to go in search of coalition partners like the formerly invincible ANC did in neighbouring South Africa. Incumbency has weighed heavily on ruling parties in 2024 and Namibia’s opposition parties will be buoyed by events in other Southern African countries. Swapo would have taken note of the crushing defeats suffered by the Botswana Democratic Party and the Militant Socialist Movement-led coalition in Mauritius in recent weeks, as well as the public outrage and unrest that has followed Frelimo’s dubious victory in Mozambique.
It is perhaps the decline of another liberation movement, South Africa’s African National Congress (ANC), that feels most analogous. The ANC surrendered its majority in May and was forced into a 10-party coalition government. Swapo might find itself in a similar position as voters go in search of alternatives – particularly younger voters who do not share their parents’ emotional attachment and loyalty to Swapo.
*Theo Klein is Economist at Oxford Economics Africa
