Economic Outlook, August 2023

Global outlook

There is an anticipated deceleration in global growth as per the July 2023 update by the IMF’s World Economic Outlook (WEO). The growth rate, which stood at 3.5% in 2022, is predicted to decrease to 3.0% for the year 2023. The subdued projection is a result of the necessary implementation of stringent monetary policies to combat inflation, the recent decline in financial conditions, the ongoing conflict in Ukraine, and the escalating trends of geo-economic fragmentation. In contrast to the April 2023 World Economic Outlook (WEO) forecast, the expected global growth rate for 2023 has been adjusted upward by 0.2 percentage points. However, there are no alterations foreseen for the year 2024, as the growth outlook for that period remains unchanged.

Sub-Sahara Africa Outlook

The economic growth trajectory within the Sub-Saharan Africa (SSA) region is expected to follow a pattern of decline, transitioning from a 3.9% growth rate in 2022 to a projected 3.5% in 2023. However, there is a positive outlook for improvement, with growth anticipated to rebound to 4.1% by 2024. The economic growth prospects for Nigeria are poised for a downturn in both 2023 and 2024, primarily triggered by a reduction in oil production by 3.2% and 3.0%, respectively.

Furthermore, inflation reached its highest point in two decades, surging to 18.8%. This increase was primarily propelled by rising energy and food prices, as well as the ripple effects stemming from the depreciation of the exchange rate. The growth trajectory of South Africa is expected to decelerate, dropping from 1.9% in 2022 to a mere 0.3% in 2023, before recovering to 1.7% in 2024. The subdued growth outlook for 2023 is rooted in structural limitations, encompassing heightened power shortages, a less robust global economic environment, and a carry-over effect from the growth downturn experienced at the end of 2022. The growth projection for 2023 has been slightly revised upwards from the earlier estimate of 0.2%, reflecting a modest growth performance observed during the first quarter of 2023.

Domestic Outlook

According to the Bank of Namibia’s Economic outlook (August 2023), Namibia’s GDP growth trajectory is anticipated to experience a deceleration throughout 2023 and 2024, primarily attributed to sluggish global demand and constrained growth within the agricultural sector. The domestic economy is predicted to moderate downwards to 3.3% in 2023 from the 4.6% registered in 2022, which is expected to moderate to 3.0% in 2024. (Figure 2). The envisaged moderation in growth for 2023 primarily stems from subdued demand both internationally and domestically. Prevailing high levels of inflation and elevated interest rates are projected to dampen expenditure. This dampening effect has been further exacerbated by the diminished global demand, which has negatively impacted commodity prices, including key minerals that Namibia relies on for export.

On the domestic front, the diminished consumer demand is likely to manifest predominantly through decreased growth within the wholesale and retail trade sectors. Adding to the factors contributing to the 2023 growth slowdown are the pronounced base effects stemming from the diamond mining sector, wherein production volumes experienced a significant 45.1% increase in 2022.

Primary industries are expected to register moderate growth rates in 2023 and 2024, on the back of robust growth in 2022. Primary industries are projected to grow by 3.2 percent and 3.6 percent in 2023 and 2024, respectively, a slowdown from a robust 12.9 percent in 2022. The mining sector, particularly the diamond mining subsector, is expected to continue supporting growth in 2023. Diamond mining is projected to expand further in 2023, on the back of a strong performance in 2022, but such growth is expected to moderate downwards. However, growth for agriculture, forestry, and fishing is expected to turn negative in 2023, reflecting weak performance from all sub-sectors.

Secondary industries are projected to grow by 3.6 percent and 3.3 percent during 2023 and 2024, respectively. This improvement is expected to come from a recovery in the construction sector, which contracted for the last seven consecutive years.

Tertiary industries are projected to grow by 2.9 percent in 2023 and by 2.6 percent in 2024. The 2023 growth estimate for tertiary industries was revised upwards by 0.9 percentage points, when compared to the estimates published in the March 2023 Economic Outlook update, mainly on account of better performance for sectors such as wholesale and retail trade, and hotels and restaurants. Figure 3

Figure 1: Overview of the World Economic Outlook Projections (Percentage Change)