The COVID-19 pandemic has sharply deteriorated Namibia’s short-term macroeconomic outlook, giving rise to urgent balance of payments (BOP) and fiscal financing needs. After an initial outbreak peaked in August, a second wave hit in late 2020. Containment measures have negatively impacted domestic consumption and economic activity, weighing on tax revenues collection. Furthermore, worsening global conditions have hindered mining production and exports, tourism receipts, and investment inflows. The economy is expected to have sharply contracted by 7.2 percent in 2020, and the recovery is set to remain subdued in 2021.
This 2019 Article IV Consultation with Namibia discusses that with the temporary stimuli now ended, the economy is rebalancing while the government is implementing a significant fiscal consolidation. A likely slow recovery, the need for further fiscal adjustment to bring public debt to a sustainable path, persistent inequalities and structural impediments to growth, point to a challenging outlook. Immediate measures are needed to deliver the authorities’ fiscal adjustment plans and bring public debt to a sustainable path. Policies should combine spending reductions and revenue increases that support long-term growth. Better targeting of cash transfers would protect the poor. Structural reforms are urgently needed to strengthen productivity and external competitiveness and boost long-term growth. Reforms should streamline business regulations, contain public sector wage dynamics, and reduce costs of key production inputs. Over time, it is important to remove non-tariff barriers to exports, foster the adoption of new technologies, and address shortages of skilled workers.
This 2017 Article IV Consultation highlights that Namibia’s economy has reached a turning point with ending of temporary expansionary factors. GDP sharply decelerated in 2016 and contracted in 2017 as construction in the mining sector came to an end and the government began consolidating. With the economy contracting and Southern Africa Customs Union’s receipts temporarily increasing, the current account balance improved significantly. The outlook remains positive with considerable vulnerabilities and risks. Growth is projected to resume in 2018, as mining production ramps up, construction activity stabilizes and manufacturing recovers, before converging to a long-term rate of about 3.5 percent, below the average of recent years.
Mr. Jiro Honda, Manabu Nose, Cesar Sosa Padilla, Mr. Jose L. Torres, Ms. Murna Morgan, Mr. Fernando G Im, and Ms. Natalia A Koliadina
Over the past decade, Lesotho and Swaziland have faced significant volatility in their fiscal revenues, owing to highly unstable Southern African Customs Union (SACU) receipts. Based on model analysis, this paper explores the advantages of implementing fiscal rules to deal with such volatility. It finds that the use of a structural balance target could smooth the growth impact from revenue shocks while helping preserve sufficient international reserves during bad times. From a long-term perspective, it suggests possible welfare gains from introducing fiscal rules. Last, it concludes that, based on experiences in other countries, developing strong institutions and improving public financial management are necessary steps to ease the transitions to a rules-based fiscal policy framework.
This 2016 Article IV Consultation highlights that Namibia has experienced remarkable growth and economic progress since the financial crisis. Strong policy frameworks and expansionary domestic policies have contributed to macroeconomic stability, robust growth, and rising living standards. Yet deep-rooted structural impediments have kept unemployment high and unresponsive to growth, contributing to persistently high inequality. The outlook remains positive with considerable vulnerabilities and risks. Growth is projected to temporarily weaken to 1.6 percent in 2016 as the construction of large mines ends and the government starts consolidating.
This Selected Issues paper assesses the impact of alternative fiscal consolidation strategies on Namibia’s growth. It uses a model developed at the IMF to gain insights on what would be a growth-friendly composition of the fiscal adjustment. The analysis suggests that a combined strategy of revenue and expenditure measures has lower negative effects on growth than a pure expenditure-based adjustment. Structural reforms improving the efficiency of public investment can further reduce the negative effect of consolidation on growth, and potentially strengthen growth. Overall, minimizing the negative impact of fiscal consolidation on growth requires combining revenue and expenditure measures, together with fiscal structural reforms.
This 2013 Article IV consultation highlights Namibia’s positive growth record over the years, which has raised overall incomes and led to positive economic outcomes. However, growth has not translated into sufficient job creation, and unemployment and income inequality are persistently high. Real GDP growth is expected to moderate to 4 percent in 2013 from 5 percent in 2012 reflecting weak global demand for exports partially offset by solid growth in domestic demand. Given the uncertain external environment, the IMF staff recommends that the authorities pursue “growth-friendly” fiscal consolidation, reining in unproductive current spending while protecting growth-promoting capital spending. The IMF staff also welcomes efforts by the government to look into ways to steer a gradual reduction of the wage bill, which would improve labor market outcomes.
Mr. Joannes Mongardini, Mr. Tamon Asonuma, Olivier Basdevant, Mr. Alfredo Cuevas, Mr. Xavier Debrun, Lars Holger Engstrom, Imelda M. Flores Vazquez, Mr. Vitaliy Kramarenko, Mr. Lamin Y Leigh, Mr. Paul R Masson, and Ms. Genevieve Verdier
The Southern African Customs Union (SACU) is the oldest customs union in the world, with significant opportunities ahead for creating higher economic growth and increased welfare benefits to the people of the region, by fulfilling its vision to become an economic community with a common market and monetary union. This volume describes policy options to address the barriers to equitable and sustainable development in the region and outlines a plan for deeper regional integration.
This report reviews economic development of Namibia in the recent years after the global crisis. The country bounced back very well after the crisis. Namibia exhibited strong performance in the primary sectors, which has led to remarkable growth in the second half of 2012. The government has launched a three-year fiscal initiative to enhance job opportunities and preserve fiscal and external sustainability. Plans have been identified to strengthen banks, control mortgages, and improve the education system. The Executive Board has appreciated Namibia’s strong macroeconomic performance.
Following the onset of the global economic crisis in 2008, SACU member countries have witnessed a significant growth slowdown, and a deterioration of their fiscal balances. This paper (i) assesses options for the design of the needed fiscal consolidation, and (ii) discussed medium-term fiscal policy rules that would help maintain a sound fiscal stance once consolidation has taken place. The main messages are: (i) government consumption cuts appears to minimize the negative impact on growth, and would be appropriate given the relatively large size of the public sector in each country, (ii) fiscal rules could be of particular interest for SACU members notably, a new customs revenue-sharing formula, procedural rules to strengthen budget process, and numerical rules at the national level.