Local stock brokerage, Simonis Storm, has maintained an elevated GDP growth forecast for Namibia of 3.7% for 2023.
This prediction is significantly higher than the International Monetary Fund’s 2.8% and the Bank of Namibia’s 3.2% growth forecasts for the domestic economy.
“Strong momentum post the pandemic can only carry our economy for so long. Positive sentiment and mindsets have the power to turn things around, but this can lose steam if reforms, forward-thinking ideas, as well as embracing views of the youth and material signs of progress in addressing long overdue issues. For now, we maintain our GDP growth forecast of 3.7% for 2023, which ranks higher than other forecasts on our economy,” SS stated in its second-quarter GDP report for 2023.
In the report, SS further noted that sentiment has shown an upward shift, driven by the promising prospects offered by green hydrogen and oil and gas sectors.
However, the stock brokerage added that an expectation remains to witness the actual realisation of these developments.
SS further commented on second-quarter growth rates when the domestic economy expanded by 3.7% year-on-year (y/y), which was a substantial slowdown when compared to the first-quarter growth rate of 5.3%.
“This performance represents the slowest rate of economic growth observed since the 1Q2021 after taking 2022 revised figures into account,” SS stated.
Namibia’s gross domestic product (GDP) for the second quarter of 2023 totalled some N$58.6 billion, representing a 2.4% quarter-on-quarter increase from the N$57.3 billion recorded during the first quarter in nominal terms.
According to SS, the growth achieved in the second quarter is commendable, particularly considering the high base effect of 8.5% y/y growth observed.
“Disaggregating the data, we observe that the growth in the second quarter of 2023 was primarily driven by the same sectors as in the 1Q2023, namely mining, utilities, transport, wholesale and retail, as well as hotels and restaurants. Notably, the sustained robust performance in these sectors since 2Q2021 is primarily attributed to the mining sector, despite its exceptionally high base of 64.5% y/y growth in 2Q2022. “The mining sector has consistently posted double-digit growth figures since the 3Q2021. The growth in the 2Q2023 was bolstered by specific subsectors within mining, including diamond mining (up 9% y/y), uranium mining (up 55.3% y/y), metal ores mining (up 37% y/y), and other mining and quarrying (up 56% y/y),” SS stated.
In stark contrast, the agriculture sector experienced the most substantial contraction both in real and nominal terms, with a 27.2% y/y decrease, exerting a 2.4 percentage point drag on GDP.
SS stated this contraction was primarily driven by a significant decline in crop farming, compared to the previous year, marking the sector’s most substantial decline since 2Q2019.
In addition, the fishing sector, typically a positive GDP contributor, contracted due to a more substantial decline in horse mackerel landing, compared to the growth in hake.
The financial services sector experienced its fourth consecutive contraction, which SS attributed to reduced deposits and diminished credit uptake by both businesses and individuals.
Meanwhile, SS pointed out that persistent inflationary pressure continues to erode the real value of employee compensation, contributing to contractions in public administration.
“In conjunction with the substantial growth rate observed in the mining sector, it also makes a significant contribution to the GDP, followed by wholesale and retail, manufacturing, education and public administration. All these sectors have witnessed expansion, except for public administration, which, despite its decline, remains the fifth-largest contributor to the GDP. Collectively, these five sectors accounted for 60% of Namibia’s GDP in 2Q2023,” SS stated.
Moreover, the SS report noted that Namibia’s GDP per capita, as a metric of individual wealth, rebounded to pre-pandemic levels and displayed robust upward momentum since 2021, reaching a GDP per capita figure of N$15 326. This, SS explained, indicates economic output increased at a faster pace than population growth.
Furthermore, GDP per hour as a proxy for labour productivity exceeded pre-pandemic levels and increased by 4% y/y in 2Q2023.
SS stated: “While these indicators suggest a more efficient economy, capable of generating more goods and services with the available labour, capital and human skills, the issue of high unemployment persists”.