Namibia Business Forecast Report Q1 2010
Challenges And Opportunities Follow RecessionAs with many countries, 2009 was a difficult year for Namibia, but 2010 should offer some relief.With regards to the economy, we have upwardly revised our 2009 real GDP estimate to -0.7%(from -2.2% previously), and moderated our forecast for 2010 from 3.4% to 3.1%. The revisionis primarily due to a swifter-than-expected recovery in mining sector output ' which accountedfor much of the decline in headline growth in Q109 ' on the back of rising global demand. Goingforward, rising commodity prices; further improvements in the global economic outlook; and the2010 FIFA World Cup in neighbouring South Africa, will combine to buttress Namibia's externalsector and provide a platform for sustained economic growth at an average of around 4.0% overthe next five years. Meanwhile, high unemployment rates and extensive problems with regards topoverty and health will continue to hamper economic growth and present real long-term challengesto the government.D espite economic concerns, preliminary results from the 2009 parliamentary and presidentialelections suggest that the ruling South West African People's Organisation (SWAPO) has lostnone of its popularity, garnering a significant majority of the votes for the fourth consecutive timesince independence. However, a new opposition force in the form of the Rally for Democracy andProgress partly suggests that on some major issues, SWAPO is becoming increasingly out of touch.This indicates that in the future, as the first generation born after independence becomes a majorvoting bloc, issues concerning health, education and poverty will become increasingly prominent.Supporting our view that economic growth is picking up, the central bank signalled an end to itsexpansionary monetary policy ' which saw rates slashed by 350bps ' on concerns over futureheadline inflation growth. However, despite the fact that the impact of previous rate cuts are yetto be felt, we are worried about weak domestic spending, which may only experience a moderaterecovery in 2010. Meanwhile, as we continue on through the year, CPI growth should be wellcontained within the 5.0-6.0% range. Going forward, the central bank is likely to pull the reins onmonetary policy, with interest rates set to rise over the medium term.With an abundance of natural resources ' notably diamonds, uranium, zinc and copper ' Namibiacan expect to see an increase in FDI focused on related projects as the global recession comesto an end. However, the government is keen to reduce its dependency on primary industries, and,with its spectacular scenery and safari, Namibia is positioning itself as a high-end tourist destination,especially ahead of the 2010 FIFA World Cup. The country has well-developed infrastructureby Sub-Saharan African standards, but further investment, particularly in transportation, is slatedfor this year. While the country continues to make significant progress against corruption, graftremains a problem.
Published on: Mar 3, 2016
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