1. Background
The economic fallout from the pandemic has had a severe impact on the Namibian economy leaving households and businesses vulnerable. The country’s Gross Domestic Product (GDP) improved since quarter 2 in 2021 as the Namibian economy is recovering from the pandemic due to related uncertainty and the “confluence of calamities” remains a concern. There are indications that consumption is gradually returning with a rebound in the Mining and Manufacturing activity.
The current rebound was mainly driven by the Agriculture and Forestry, and the Mining and Quarrying sectors.
The “organic “pace of recovery for domestic demand will be slowed by higher commodity prices and elevated uncertainty related to the Ukraine/Russian conflict. External demand will also be affected by the geopolitical tensions, mainly due to an expected slowdown in the advanced economies.
2. Analysis
The GDP recorded a rebound of 5.3% in the first quarter of 2022. The economic activity improved significantly from a decline of -4.9% during the same quarter last year. (See figure 1 below).
The rebound in the manufacturing sector of the country was driven by an increase in mining-related activities. The Agriculture and Forestry sector improvement was a result of normal to average rainfall received in 2021 and 2022 which boosted crop yield. See figure 2. During the period under review, the Mining and Quarrying sector recorded the highest annual recovery from -19.1% to 23.5% followed by the Manufacturing sector from -18.1% to 7.5%, Agriculture and Forestry sector from -2.9% to 5.9% in relation to the same period last year. In addition, sectors that contributed to the rebound are Health with 8.9%, Information, and Communication with 4.8%, and Hotels and Restaurants with 4.4%.
The Construction sector (See figure 2) continues to remain under pressure and contracted by 7.5%, while the Fishing sector also declined by 2.0%. The fiscal consolidation led to Public Administration recording a decline of 2.8% for quarter 1 of 2021.
Figure 1: Quarterly Gross Domestic Product (GDP) % Change
Figure 2: Sectors percentage growth (GDP) Q1 2021 vs. Q1 2022
3.Outlook
Growth in advanced economies is projected to sharply decelerate from 5.1% in 2021 to 2.6% in 2022, which is 1.2 percentage points below projections in January 2022. Growth is expected to further moderate to 2.2% in 2023, largely reflecting the further unwinding of the fiscal and monetary policy support provided during the pandemic.
The emerging markets and developing economies, growth is also projected to fall from 6.6% in 2021 to 3.4% in 2022, well below the annual average of 4.8% over 2011-2019.
The Namibian economy could now be on the recovery path and quarter 2 of 2022 would be the turning point as it would eliminate the base effect and be a measure of the highly anticipated “organic” growth.