2020 Economic Overview
Executive summary
The Namibian economy was
hard hit during 2020 due to the negative impact of COVID-19 pandemic. The domestic
economy contracted by 8.5% during 2020 from a contraction of 0.9% recorded in
2019. Real Gross Domestic Product (RGDP) declined to N$ 132.5 billion from N$ 144.8 billion
recorded for 2019. This was the deepest economic contraction since
independence.
The main contributors to the economy’s contraction were the
manufacturing sector, taxes on products, mining and quarrying, wholesale and
retail trade and the financial services activities sectors. Out of a total of
18 sectors of the economy only 6 sectors registered growth for the year 2020
and the rest of the 12 sectors recorded a decline with the hotels and
restaurants sector leading the pack followed by the transport sector (See
figure 1). The secondary industries recorded the greatest decline with 13.0%
followed by the tertiary industries with a decline of 5.7% and primary
industries contribution to GDP declined by 5.9%.
Namibia’s GDP is driven by the tertiary sector which was the main
contributor to the country’s economic growth. In a skills-constrained economy
like Namibia, the bias towards skills-intensive employment driven by
technological advancement has the unintended consequence of raising wage
premiums, which further entrenches inequality and contributes to rising
unemployment (See figure 2).
Analysis
The Hotels and the restaurants sector recorded the highest contraction
of 31.2% this was due to a lack of demand for accommodation services which
resulted from the lockdown restrictions imposed to contain the spread of
Covid-19 for the year 2020. The taxes on products sector recorded the second
highest contraction of 27.5%, this was due to reduced disposable income as a
result of retrenchments and job losses.
The transport sector recorded the third
highest contraction of 23.1%, this was due to the low demand for air transport
services as a result of local and international travel restrictions. The
manufacturing sector recorded the fourth largest contraction of 18.3%, this was
due to low production reported for processed zinc as a result of the closure of
the mine, low production of beverages as a result of the restriction on alcohol
sales and also a low production of meat (See figure 1).
The water and electricity sector recorded the highest growth of 19.5%,
this was driven by the growth in the electricity subsector due to good rainfall
received in the catchment areas. The information and communication sector
recorded the second highest growth of 17.4%, this was due to a high demand for
communication services. The agriculture forestry and fishing sector recorded
the third highest growth of 6.1%, this was driven by the growth in the crop
farming subsector as a result of good rainfall which resulted in good harvests
of cereal crops.
The health sector recorded the fourth largest growth of 4.5%,
this was driven by a high demand of health services due to Covid-19 (See figure
1 below). For the year 2020, the secondary industries recorded a decline of
13.0% from a growth of 2.2% recorded in 2019, this was driven by low growths
recorded in the manufacturing sector. The primary industries
recorded a decline of 5.9% from a decline of 6.9% recorded in 2019, the slight
growth was driven by the growth recorded
for the agriculture, forestry and fishing sector. Lastly the tertiary sector recorded a decline of 5.7%
from a growth of 1.1% recorded in 2019, this was driven by low growth recorded
in the transport sector, wholesale and retail sector and in the administrative
and support services (See figure 2 below).
Figure 1: GDP Growth per sector (2020)
Figure 2: Industries contribution to GDP (2019 & 2020)
Outlook
Economic prospects continue to diverge across countries and vaccine access has emerged as the principal fault line along which the global recovery deviates. The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere.
Economic policy has become health policy and the efficient roll-out of Covid-19 vaccines will continue to help flatten the curve. Additionally, the relaxed Covid-19 protocols gives an opportunity for the economy to open up. However, an active demand of policies that caters towards the rebuilding of the economy is highly advised.
Concerted, well-directed structural reforms can make the difference between a future of sustainable recovery for the Namibian economy or one with widening fault line, as many struggle with the health crisis while a handful see conditions normalize, albeit with the constant threat of renewed flare-ups but to pre-covid19 levels.