Executive summary
The domestic economy continued with resilience for the year 2022 from the devastating global economic shocks which included the effects of the Russian conflict with Ukraine and compounded the residual economic effects of the Covid-19 crisis, hindering growth and driving inflation to multi-high levels. Spiraling food and energy prices squeezed households around the world, and the tightening of monetary policy by the central bank to rein in inflation exerted further pressure on Namibian consumers and producers and the entire economy. The domestic economy recorded a growth of 4.6% in 2022 in real terms (GDP growth unadjusted for inflation). While GDP growth adjusted for inflation was 12.1% for 2022. This implies that inflation eroded Gross Domestic Product (GDP) growth by 7.5%.
In monetary terms, Real Gross Domestic Product (RGDP) increased to N$ 144.1 from N$ 137.8 recorded in 2021, while Nominal Gross Domestic Product (NGDP) increased to N$ 206.2 billion from N$ 183.9 billion recorded for 2021. Consumer spending accounted for 78.2%, government spending 23.2%, investment 17.4%, and net exports (18.7%) of total Nominal Gross Domestic Product (NGDP).
Economic activity improved significantly when compared to the growth of 3.5% recorded in 2021 (See figures 1 & 2). The improved performance was mainly driven by the primary and secondary industries which recorded growth rates of 12.9% and 3.3%, respectively. The Tertiary industries also recorded improved performance of 2.2% from a growth of 1.8% recorded in 2021. The main sectors that contributed to the expansion of the economy were manufacturing, electricity, water, and mining and quarrying (See figure 3).
Analysis
- The mining and quarrying sector recorded a strong growth of 21.6% in 2022 when compared to a growth of 11% registered in 2021. The growth in the sector was ascribed to the diamond mining subsector which registered robust growth. During the period under review, the growth recorded for the diamond mining subsector was ascribed to an increase in diamond production driven by the Debmarine diamond production which accounted for 80% in 2022. Debmarine’s diamond production increased by 52% in relation to 2021 primarily due to the new purpose-built vessel, the MV Benguela Gem, inaugurated in March 2022. Additionally, the mining of metal ores observed marginal growth rates recording 0.5%
- The manufacturing sector recorded a growth of 5.0% during the period under review when compared to a contraction of 1.2% registered in 2021. The strong performance resulted from diamond processing, meat processing, and other food products that posted strong growths of 33.7%, 11.6%, and 4.8%
- The electricity and water sector registered a growth of 10.3% in 2022 when compared to a decline of 8.4% registered in 2021. The robust performance in the sector was attributed to the electricity subsector which recorded a growth of 17.5% which emanated from an increase in domestic production
- The administrative and support services sector recorded a positive growth for the first time since 2016. The sector registered a growth of 3.9% during the period under review. The recovery in the sector came as a result of increased demand for administrative and support services such as security services, travel agencies activities, and car rentals due to the recovery of the tourism sector
- The construction industry has been contracting since 2016; in 2022, the sector contracted by 16.4%, compared to a decline of 11.3% in 2021. The poor performance was reflected in the construction works for civil engineering and related services and buildings and related services.
- The financial and insurance service activities sector rebounded to post a growth of 1.7% during 2022 at the back of a contraction of 5.1% recorded in 2021. The improved performance was primarily driven by the financial service activities subsector which grew by 2.4% due to an increase in interest income (fees, charges, and commission) stemming from increased interest rates coupled with the improved economic activities in the domestic economy.
Figure 1: Namibia annual GDP growth rates (2011 – 2022)
Figure 2: Real GDP growth rates for selected economies (2022)
Figure 3: GDP growth rates per sector (2021 & 2022)
Outlook
The increase in mining activities drove the growth of the primary sector present the country’s most resilient sector from a production and export revenue perspective. Value addition and beneficiation of the mining and other primary commodities remains a critical component to consider. This will help create job opportunities for a vast majority of unemployed youth.
Additionally, the necessary fiscal discipline and the implementation of policy priorities, backed by fiscal transparency have the potential to keep the domestic economy on an upward trajectory. More importantly, the country must strive for inclusive growth.
We project that there will be broader spill-over effects from China’s reopening including more favorable global financial conditions and increased trade with other countries including Namibia. However, a weaker external demand compounded by inflation, currency depreciation, a looming energy crisis, and other domestic headwinds including poor rainfall continues to shape economic developments.