Namibia Country Risk Report 20 2018
Economic growth will recover over the coming years as the Husab uranium mine moves towards peak production, making Namibia one of the world's largest uranium producers. While the economy will see a significant ramp-up in mining output, high household indebtedness will limit growth in private consumption.
The Bank of Namibia (BoN) will enact one further cut in H118, reducing its key policy rate by 25 basis points (bps) to 6.50% to maintain the country's one-to-one peg with the South African rand and support a broader economic recovery. That said, we believe that an acceleration in prices in H218 will restrict the BoN's options going forward, prompting the end of the bank's easing cycle in 2019.
Rising mining sector revenues and modest efforts at fiscal consolida-tion will see Namibia's fiscal deficits continue to fall in 2018 and 2019.
That said, limited progress in diversifying the country's revenue base, coupled with rising interest payments and a high public-sector wage bill, will see the country record moderately higher budget shortfalls in the next decade when compared to the last.
Namibia's current account deficit will begin to narrow from 2017 onwards on the back of gradually rising commodity prices and as the Husab uranium mine ramps up production. The completion of several major construction projects and regulatory uncertainty will see investment decline and better conditions in the agricultural sector will see import demand increasing. Rising export receipts and easing financing needs will see the country's external debt load slowly fall in its share of GDP.
President Hage Geingob's sizeable victory at the ruling SWAPO party's elective congress in November 2017 will help consolidate his leadership, tempering disputes between different elements of the ruling party and thus diminishing political risk. That said, proposed empowerment legislation will continue to weigh on investor sentiment as it moves towards implementation, although we do believe the final legislation will be more moderate than many investors fear.
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