Boston, MA -- (ReleaseWire) -- 05/01/2014 -- Despite persistent external headwinds, we predict that the Namibian economy will experience a modest pickup in growth in 2014. Favourable credit conditions and a recovery in the agricultural sector will support solid private consumption growth, while a major government housing programme and several new mining projects will see fixed investment growth remain robust.
The expansionary FY2014/15 budget announced in February contains few major surprises. In an election year, a public sector wage hike will be politically popular but will add to persistent recurrent spending pressures. Given our slightly more cautious outlook for the economy, we believe the budget shortfall of 5.4% of GDP projected by the government could prove ambitious.
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With inflation likely to be contained and with economic growth still below trend levels, albeit picking up, we expect interest rates to stay at current levels through 2014. The key risk to the inflation outlook continues to come in the form of imported price pressures stemming from a weak currency.
Major Forecast Changes
The latest balance of payments data published by the Bank of Namibia have prompted changes to our forecasts for Namibia's current account. We now predict a current account shortfall equal to 2.2% of GDP in 2014 and 3.1% of GDP in 2015 (compared to 2.3% and 3.0% previously).
Key Risks To Outlook
Namibia's small, open economy is highly exposed to events on the world stage. While we have incorporated the ongoing global malaise into our economic forecasts, if the situation abroad deteriorates (or, conversely, improves) more than we anticipate, we would have to adjust our forecasts accordingly.
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