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Namibia Country Risk Report Q2 2016

Namibia Country Risk Report Q2 2016

Core Views

Namibia’s economy will face dual headwinds of low global demandand prices for its key commodities exports. This will have knock-onimplications for investment in the mining sector. We forecast growthto slow from 3.9% in 2015 to 4.1% in 2016 and pick up slightly to4.4% in 2017.

The landslide victory for president-elect Hage Geingob and theruling SWAPO in Namibia’s general elections on November 28,2014 augurs for broad political stability and a pro-business economicagenda. The result means that SWAPO will expand on its two thirdsmajority in the national assembly. Hopes for a shift towards a moreinclusive electoral landscape continue to prove elusive.

Namibia’s fiscal position will deteriorate further in the next two yearsas a contraction in the mining sector – which accounts for around58% of export value – will slash tax income. We see little scope fora near-term pull-back in spending, given the government’s mediumterminclusive growth plans and therefore forecast a deeper fiscaldeficit in FY 2016/17, of 6.0% from a deficit of 4.9% in FY2015/16.

Major Forecast Changes

We have revised down our real GDP growth forecast for 2015 and2016, from 5.3% in 2015 and 5.5% in 2016 to 3.9% and 4.1% in2015 and 2016, respectively.

We have revised our government budget balance forecast from adeficit of 10.3% as a percentage of GDP to 4.9% in FY2015/16 aswell as from a deficit of 11.2% to 6.0% in FY2016/17.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Fixed Investment To Outperform Private Consumption
The outlook for Namibia's economy for the next few years is positive and we expect relatively stable real GDP growth of 4.1% in 2016
and 4.4% in 2017. Fixed investment growth will increase due to new regulations of minimum investment into unlisted assets.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal And Public Debt Outlook
Ministry Of Finance Improves Fiscal Transparency
The publication of the Mid-Year Budget Review Policy Statement in November 2015 indicates a continued focus on infrastructure
development and social spending. That said, with revenue growth set to remain subdued in FY2016/17, these spending commitments
will keep the fiscal balance well in the red.
Structural Fiscal Position
External Trade And Investment Outlook
Namibia's Rising Debt Will Increase Debt-Servicing Costs
Namibian debt has increased by over N$1bn dollars since the beginning of 2015 There will be increased debt-servicing costs following
the rise in debt levels due to the depreciating currency and the possibility of the U.S. Federal Reserve increasing interest rates.
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
Interest Rate Increases Expected In 2016
We expect rate hikes of 25bps by Q216 leading to 6.75% after the Bank of Namibia's MPC left the benchmark lending rate unchanged
at 6.5% in December, a decision mainly based on the deceleration of household instalment credit growth. Furthermore, forecast inflation
will see an uptick from an average of 3.5% in 2015 to 4.2% in 2016 due to expected increases in food prices.
TABLE: TOP 5 GOODS EXPORTS IN 2014
TABLE: TOP 5 GOODS IMPORTS IN 2014
Monetary Policy Framework
Chapter 2: 10-Year Forecast
The Namibian Economy To 2025
Resource-Powered Growth
Thanks to the country's strong primary sector, we expect growth to prove relatively robust in the long run, averaging around 4.2
%annually over 2016 to 2025. With a stable political environment, the main risks are the limited size of the domestic market, rising income
inequality and depressed global demand for the country's primary export: diamonds.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
President Geingob To Focus On Poverty Eradication
President Geingob will continue the battle against poverty eradication with the help of a solidarity wealth tax, the Mass Housing Project
and education expenditure. We believe that poverty will decrease over next five years with the continued dedication of the President and
joint effort by fellow Namibians.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Stability Likely To Prevail Over The Coming Decade
While Namibia's enormous income inequality poses some risks to political stability, we believe the population is likely to continue
supporting the South West Africa People's Organization (SWAPO) government for the next 10 years, ensuring broad political stability
and continuity.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: TRADE PROCEDURES – DOCUMENTS REQUIRED
TABLE: DURATION AND COST OF TRADE PROCEDURES
TABLE: SUB-SAHARAN AFRICA – TRADE PROCEDURES AND GOVERNANCE RISK
Vulnerability To Crime
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Unfinished Business In 2016
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: NAMIBIA – MACROECONOMIC DATA & FORECASTS

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