The International Monetary Fund (IMF) Executive Board has completed its Article IV Consultation with Namibia. The Namibian authorities have agreed to publish the Staff Report prepared for this consultation.
Namibia's economic growth has slowed from 5.4% in 2022 to 3.7% in 2024, primarily due to reduced production following a drop in diamond prices. This decline overshadowed the positive impact of rising gold and uranium prices. Oil exploration stabilized in 2024 after a surge in 2023, while agriculture suffered significantly due to the severe drought of 2023-24. Inflation decreased as food and fuel prices fell internationally.
Growth is expected to remain modest in the short and medium term, although the end of the drought may boost growth in 2025. However, uncertainties in global trade policies, particularly concerning U.S. tariffs, along with a weak diamond market, are likely to limit progress. Growth forecasts stand at approximately 3¾% for both 2025 and 2026, with medium-term projections around 3%, hindered by structural rigidities despite increased public capital spending. Consumer price inflation is expected to ease to 4.1% in 2025 and stabilize around 4.5% thereafter.
Risks to Namibia's economic outlook are predominantly negative, including fluctuations in commodity prices, worsening global trade tensions, increased economic fragmentation, and tighter global financial conditions. Domestic risks involve social unrest from high unemployment and inequality and volatility from weather shocks. Potential upside factors include easing trade policy tensions and accelerated development of oil, gas, and green hydrogen projects.
The IMF Executive Directors acknowledged Namibia's economic resilience amid challenging external conditions and commended the new government's dedication to inclusive growth and climate shock resilience. They emphasized the need for further efforts to harness economic potential through private sector-led initiatives promoting inclusivity, weather resilience, and diversification.
Directors supported fiscal discipline while advocating for larger fiscal consolidation over the medium term to secure favorable public debt dynamics and strengthen Namibia’s external position. They stressed accelerating fiscal reforms such as civil service reform to manage wage bills better, state-owned enterprise reforms, enhanced public financial management, improved tax administration, increased public investment for growth enhancement, expanded social protection measures, and building resilience against weather shocks.
Additionally, Directors recommended aligning policy rates gradually with those of the South African Reserve Bank (SARB) while remaining vigilant about economic conditions without capital outflows.
Directors praised advancements in financial sector resilience through new bank resolution policies but urged continued risk monitoring related to sovereign bank connections and household debt levels. They suggested finalizing additional measures like counter-cyclical capital buffers and enhancing crisis resolution cooperation while strengthening AML/CFT frameworks for expedited removal from the FATF grey list.
They also highlighted that bold structural reforms are crucial for fostering sustainable growth led by the private sector while improving external competitiveness by addressing barriers such as human capital improvement, reducing skill mismatches, enhancing business climates, strengthening governance structures, promoting digitalization efforts; all aiming towards harnessing oil/gas/green hydrogen potentials diversifying economy creating jobs simultaneously.
The next Article IV Consultation with Namibia is scheduled on a standard annual cycle.