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Namibia Country Risk Report Q1 2020

Namibia Country Risk Report Q1 2020

Following two years of recession in 2017 and 2018, we forecast that real GDP growth will slide further into negative territory in 2019, to -2.2%, before picking up modestly to 0.8% in 2020. The outlook for the economy remains bleak, with fiscal consolidation constraining the government's ability to significantly stimulate the economy, particularly in years of drought, and boost job opportunities.

We forecast the Bank of Namibia (BoN) will keep its Repo Rate on hold at 6.50% in 2019-20. Continued weakness in Namibia's economy will increase the impe-tus for monetary stimulus. That said, the one-to-one peg between the Namibian dollar and the South African rand typically leads the BoN to follow the policy trajectory of the South African Reserve Bank, which we also expect to hold rates.

An increase in operational expenditure and a dim outlook for revenues will lead to a temporary pause in fiscal consolidation in 2019. Namibia will resume a gradual reduction in its budget deficit from 2020 on, mainly on the back of rising Southern African Customs Union revenues and as spending pressures, after the November 2019 elections, ease. That said, rising interest payments on national debt and a high public-sector wage bill will continue to weigh on the fiscal balance over the coming years.

Namibia's current account deficit will narrow in 2019 due to subdued demand for imports and an uptick in uranium exports. However, we forecast the deficit will widen over 2020-2021 as demand for imports picks up and diamond exports continue to disappoint.

We expect incumbent President Hage Geingob and The South West Africa People’s Organisation (SWAPO) to remain in control of policy following the November 2019 general elections, ensuring a largely business-friendly agenda. That said, though not our core view, the potential for SWAPO's parliamentary majority falling below two-thirds could prolong policy uncertainty over land reform.

Key Risks

Namibia's small, open economy is highly exposed to events on the world stage. A greater than anticipated weakening of global demand could weigh more on the country's mineral exports, including diamonds and uranium.

Much of the economy remains closely tied to agriculture, and weather poses substantial risks, as illustrated by drought over the past two years. Changing weather conditions will affect growth and inflation.

Namibia's statistics have been subject to multiple revisions and this weighs on the reliability of data for the country.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Growth Prospects To Improve Slowly In Namibia
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Namibia's Current Account Deficit To Narrow In 2019, Widen Over 2020-21
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP-FIVE GOODS EXPORTS IN 2018
TABLE: TOP-FIVE GOODS IMPORTS IN 2018
Monetary Policy
Bank Of Namibia To Keep Policy Rate On Hold Through 2020
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Namibia To Resume Fiscal Consolidation In FY20/21
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES FY2018/19
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Namibia Country Risk Q1 2020Contents10-Year Forecast
The Namibian Economy To 2028
Growth To Continue Relying On The Mining Sector
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Ruling Party's Likely Re-Election To Ensure Policy Continuity In Namibia
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Ruling Party To Retain Support, But Challenges Persist
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: FREE TRADE AGREEMENTS
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Downside Revisions To Stabilise Somewhat, But Policy Risks Remain
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: NAMIBIA – MACROECONOMIC DATA AND FORECASTS

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