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Macroeconomic Framework
ABBREVIATIONS
EPA
FTA
GBP
GDP
GFCF
HDI
HRDP
IMF
MEF
MEWG
MTEF
NAD
NamPower
NamWater
NamPort
NCPI
NDP
NHIES
NHRP
NSA
NSX
O/M/As
PPP
PSCE
Repo rate
RISDP
SACU
SADC
SSA
TAC
TIPEEG
US
USD
WEO
Economic Partnership Agreement
Free Trade Area
Great British Pound
Gross Domestic Product
Gross Fixed Capital Formation
Human Development Index
Human Resources Development Plan (MoE)
International Monetary Fund
Macroeconomic Framework
Macroeconomic Working Group
Medium Term Expenditure Framework
Namibia Dollar
Namibia Power Corporation
Namibia Water Corporation
Namibia Ports Authority
Namibia Consumer Price Index
National Development Plan
National Household Income and Expenditure Survey
National Human Resources Plan (NPC)
National Statistics Agency
Namibia Stock Exchange
Offices, Ministries and Agencies
Public-Private Partnership
Private Sector Credit Extension
Repurchase rate (previously referred to as the Bank rate)
Regional Indicative Strategic Development Plan
Southern Africa Customs Union
Southern Africa Development Community
Sub-Saharan Africa
Total Allowable Catch
Targeted Intervention Programme for Employment & Economic Growth
United States of America
US Dollar
World Economic Outlook
Page 1
~ta(:rt)(connmic rnme1'tork
FOREWORD
The \t1:1~rceconoU1ic Framework ('vH=F) is an important document in 1113'i1 serves as a prelude to
tile U1L1ll1ulnational budget because it contains macroeconomic projections for the three-year
Medium-Term Expenditure Framework C\'ITEF) period, In tum. these projections constitute an
important basis for revenue forecasting. Furthermore. Ihe MEF highlights kev policy intervention
ureas that are aimed at addressing the challenges facing the OCOnOID) by optimising upside
opportunities.
111;S"Ineroeconomic Frumew ork is presented at a lil"~
\,hen the recovery of the global economy
was moderate and subjected to risks emanating from fiscal challenges in the Euro Zone and US
('!Col10111ies.
Ihe lucklustre performance of the global economy dunng 2010 and lOll had a negative impact
the '1amibian economy and more specifically. on the e....port-driven sectors such as
agnculture, fishing. mining and :ourism_ A~ a small and open economy. Namibia is exposed to
gloool economic trends.
011
lhc most significant risk to tho:domestic economy is the likely decrease in export due 10 reduced
demand and lower prices fur Namibia's comrnodiues, particularly diamonds and uranium.
Furthermore. a weaker global economy \\;11 'mvc ~ignific.'Ml implications for government
revenue in the form oL lower (ax revenue
Ihc growth uncertainty in 1)1(' global economy would persist over the MTEF period, with
negative ccnsequeuces fUf domestic economic performance and public revenue. I hus, the fiscal
policy over the !\OITEFperiod is aimed at the consolidation of the recover) of the Namibian
economy to mitigate against (he effects of g10JaJ economic (rends.
Amidst the expected moderate growth of the global economy. the macroeconomic pol icy
outlines
reforms and interventions thaI are essential 10 enharncc Namibia's competiveness in
order to address the core challenges of economic grow tho Job creation and increased income
equality .
'/
\j:P\'-'-\....~
,
~
SAARA'KlJ[je;ON~..LWA~STER
OF FlNANCF.
1ADmtA. MP
Macroeconomic Framework
TABLE OF CONTENTS
FOREWORD..................................................................................................................... 2
EXECUTIVE SUMMARY .............................................................................................. 5
A.
INTRODUCTION ................................................................................................... 7
B. OVERVIEW OF RECENT ECONOMIC DEVELOPMENTS.......................... 8
a) GLOBAL ECONOMY ............................................................................................. 8
b) SUB-SAHARAN AFRICAN ECONOMY ............................................................... 9
c) DOMESTIC ECONOMY ....................................................................................... 10
(i) Impact of global developments on the Namibian economy ................... 10
(ii) Supply-side Developments .................................................................. 11
(iii) Demand-side Developments .............................................................. 13
(iv) Fiscal Developments ......................................................................... 14
(v) Repo rate developments ...................................................................... 15
(vi) Price developments ........................................................................... 16
(vii) Balance of Payments ......................................................................... 16
(viii) Foreign Reserves ............................................................................ 17
(ix) Exchange rate developments ............................................................. 17
(x) Namibia‟s Competitiveness ................................................................. 19
(xi) Policy interventions to enhance competitiveness ............................... 19
(xii) Economic, financial and credit surveillance....................................... 20
(xiii) Job creation .................................................................................... 21
(xiv) Poverty alleviation .......................................................................... 23
(xv) Fourth National Development Plan (NDP4) ....................................... 26
(xvi) Subsidies and transfers to State-owned Enterprises (SOEs) ............. 27
(xvii) Revision of the incentives regime ................................................... 27
(xviii) Regional economic integration ....................................................... 27
C. MEDIUM TERM ECONOMIC OUTLOOK ..................................................... 27
a) GLOBAL ECONOMIC OUTLOOK ...................................................................... 27
b) DOMESTIC ECONOMIC OUTLOOK .................................................................. 29
(i) Central (baseline) growth scenario ...................................................... 29
(ii) Supply-Side Projections ...................................................................... 30
(iii) Demand-Side Projections .................................................................. 32
(iv) Price developments ........................................................................... 34
c) OIL, FOOD AND COMMODITY PRICES ........................................................... 34
(i) Oil Prices ........................................................................................... 34
(ii) Food prices ......................................................................................... 35
(iii) Diamond and Metals ......................................................................... 36
D.
CONCLUSIONS.................................................................................................... 38
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Macroeconomic Framework
E.
WAY FORWARD ................................................................................................. 39
ANNEX A: OVERVIEW OF DOMESTIC ECONOMIC DEVELOPMENTS ..... 40
a) Monetary and Financial Market Developments ...................................................... 40
b) Capital Market Developments ................................................................................. 40
c) Exchange Rate Developments ................................................................................. 40
d) External Sector Developments ................................................................................ 41
ANNEX B: DIFFERENT GROWTH SCENARIOS ................................................ 42
a) Upper Estimate ........................................................................................................ 42
b) Lower Estimate ....................................................................................................... 42
ANNEX C: ASSUMPTIONS FOR GDP ESTIMATES AND PROJECTIONS .... 43
a) INTERNATIONAL AND REGIONAL ASSUMPTIONS ..................................... 43
b) DOMESTIC ASSUMPTIONS ................................................................................ 43
(i) Supply Side Assumptions .................................................................... 43
(ii) Demand Side Assumptions .................................................................. 45
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Macroeconomic Framework
EXECUTIVE SUMMARY
The Macroeconomic Framework (MEF) was formulated during a period characterised by
uncertainty in the process of global economic growth and recovery, primarily due to Euro Zone
sovereign debt challenges coupled with fiscal challenges in the US and a Japanese economy still
battling to overcome the consequences of the March 2011 earthquake and tsunami which
culminated in the Fukushima nuclear disaster. Furthermore, the subsequent sluggish demand in
these advanced economies for manufactured goods from emerging economies, particularly
China, have resulted in transmission of slowing growth to many developing countries.
As Namibia is a small and open economy, the lacklustre performance of the
global economy has a negative impact on domestic output via trade,
investment and financial linkages. The slowdown in the global economy
particularly affects the export-driven sectors such as agriculture, fishing,
mining and tourism.
Namibia is
vulnerable because
it is a small, open
economy
The current estimates and projections indicate that restrained global growth is likely to persist
until the outer years of the Medium-Term Expenditure Framework (MTEF), where after a
gradual recovery could be experienced. It is expected that domestic economic growth trends will
follow that of the world economy to some degree; however magnitudes of growth can be
expected to differ as has been the case over previous MTEFs. Hence, domestic economic growth
is expected to be lacklustre and fairly flat during the period under review.
Although secondary industries are projected to register a relatively high average real growth rate
of 6.0 percent over the MTEF, they account for only 19 percent of GDP, compared to 17 percent
for primary industries (forecast to average 3.0 percent growth over the MTEF period) and 57
percent for tertiary industries, which are expected to expand at an average rate of 3.3 percent.
The fact that tertiary industries account for a greater share of GDP than primary and secondary
industries combined highlights the importance of the sector for economic growth, and also
suggests that Namibia is currently successfully moving towards the Vision 2030 goal of
becoming an industrialized nation.
There is a need to harmonise Medium-Term Plans with the goals of the
NDP4 goals are
Fourth National Development Plan (NDP4) in order to address the triple
growth,
jobs and
challenges of job creation, poverty reduction and increasing equality over
income equality
the Medium-Term Expenditure Frameworks of the NDP4 period. This is a
formidable national challenge in that it calls for optimal resource allocation
for the implementation of critical performance programmes in the selected priority sectors,
namely, manufacturing, transport and logistics, agriculture and tourism. In addition, areas of
weaknesses pertaining to international competitive rankings have to be addressed in order to
create business operating conditions that are conducive for economic growth, job creation and
development.
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Macroeconomic Framework
An impact assessment of the Government‟s intervention programmes towards poverty reduction
remains a core challenge. However, progress has been made with regards to poverty reduction in
that the proportion of the population classed as „severely poor‟ dropped from 14 percent in
2003/04 to just under 10 percent in 2009/10. The proportion classed as „poor‟ has also dropped,
from 28 percent in 2003/04 to under 20 percent in 2009/10.
In terms of a broader definition of poverty, Namibia‟s Human Development Index (HDI) 2011
score continues to improve, rising to 0.625 in 2011 from 0.622 in 2010. This placed Namibia‟s
rank globally at 120 out of 187 countries in 2011, about mid-way in the „Medium Human
Development‟ category. However, despite these improvements, poverty remains a pervasive
problem in Namibia. The World Bank estimates that, based on an urban poverty line and rural
vulnerability to food insecurity, at least two-thirds of the population are absolutely poor1.
Moreover, the incidence of poverty is more marked in rural areas, with such regions accounting
for around three-quarters of Namibia's poor.
The national triple goals of job creation, poverty reduction and improved
income equality can only be realized through sustainable economic growth.
However, to bring about sustainable economic growth and development,
deliberately devised policy interventions in carefully identified and selected
areas, industries and sectors must be implemented.
Growth can be
realized through
deliberately devised
policy interventions
1
Absolute poverty is a level of poverty as defined in terms of the minimal requirements necessary to afford minimal
standards of food, clothing, health care and shelter
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Macroeconomic Framework
A.
INTRODUCTION
The Macroeconomic Framework (MEF) serves as a prelude to the annual national budget
formulation process and, therefore, focuses on the following important issues:

Review of the past trends and recent economic developments at the global, regional
and domestic level;

Macroeconomic estimates and projections for the three-year
Medium Term Expenditure Framework (MTEF) period. These
estimates and projections are based on assumptions about the
likely growth trajectory of the global, regional and domestic
economies and constitute the primary basis for revenue
forecasting; and

MEF provides
estimates and
projections for the
MTEF
Key policy intervention areas which, going forward, are aimed at addressing
challenges and structural weaknesses by optimising upside opportunities.
The MEF helps to set the national policy agenda as part of the analysis for the national budget
over the three-year MTEF. It also provides the private sector and the general public with an
insight into the Government‟s economic assumptions that underlie its budget formulation and
economic policy proposals. With this in mind, the MEF is divided into the following sections:

Overview of recent global, emerging market, regional and domestic economic
developments.

Projection of global and domestic economic growth over the next MTEF.

An overview of international competitiveness ratings.

Policy interventions that will contribute to job creation, poverty reduction and alleviation
of inequality through sustainable economic growth.
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Macroeconomic Framework
B.
OVERVIEW OF RECENT ECONOMIC DEVELOPMENTS
a)
GLOBAL ECONOMY
1.
The pace of world output growth remained subdued during 2011,
Sovereign debt
primarily due to the sovereign debt challenges faced by the Euro Zone,
problems in Euro
fiscal challenges in the US and a sharp contraction in production and
Zone and fiscal
private demand in Japan, compounded by sluggish demand in the
challenges in the US
emerging economies, notably China. Furthermore, slowing growth
persisted
resulted in increased unemployment and labour tensions in developed
countries which, in turn, resulted in even lower output and growth. Consequently, world
output registered a low growth rate of 3.8 percent in 2011 compared to a rate of 5.1 percent
in 2010. (Table 1 and Figure 1).
Table 1: World Output, Real GDP - Annual percentage changes
Region/Country/Description
2009
2010
-0.6
5.1
World Output
-3.5
3.0
Advanced Economies
United States
-3.1
2.4
Euro Zone
-4.4
2.0
Japan
-5.5
4.5
United Kingdom
-4.0
1.8
Canada
-2.8
3.2
2
Other advanced economies
-1.2
5.9
2.7
7.4
Emerging & Developing Countries
economies
Central and Eastern Europe
-3.6
4.6
Commonwealth of Independent States
-6.4
4.8
Russia
-7.8
4.3
Developing Asia
7.0
9.5
China
9.2
10.4
India
5.9
10.1
Middle East and North Africa
2.6
5.0
Latin America and Caribbean
-1.5
6.2
Brazil
-0.3
7.5
Sub-Saharan Africa
2.8
5.3
Angola
2.4
3.4
Namibia
-1.1
6.6
South Africa
-1.5
2.9
2011
3.8
1.6
1.8
1.4
-0.8
0.8
2.4
3.2
6.2
5.3
4.9
4.3
7.8
9.2
6.8
3.3
4.5
2.7
5.1
3.9
4.8
3.1
Average
2.8
0.4
0.4
-0.3
-0.6
-0.5
0.9
2.6
5.4
2.1
1.1
0.3
8.1
9.6
7.6
3.6
3.1
3.3
4.4
3.2
3.4
1.5
Sources: IMF WEO October 2012 and National Accounts 2011
2
Excluding the G7 (Canada, France, Germany, Italy, Japan, UK, US) and Euro Area counties)
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Macroeconomic Framework
2.
Advanced economies followed the pattern of world output with a growth rate of 1.6
percent 2011, down from the 3.0 registered in 2010. This was mainly attributed to the low
growth in the Euro Zone and US as well the contraction in Japan.
3.
Economic conditions in the Euro Zone remain restrained due to weakened financial
conditions and falling confidence as a result of increasing sovereign debt concerns, coupled
with low growth levels in several EU member states.
4.
Emerging and developing economies registered relatively high
growth rates of 6.2 percent in 2011 and 7.5 percent in 2010, mainly
due to the robust growth rate of developing Asia, driven by China‟s
growth of 9.2 percent in 2011 and 10.4 percent in 2010.
5.
However, despite remaining buoyant, economic conditions in these countries weakened in
2011, mainly as a result of the moderation in export volumes due to suppressed overall
global demand. Growth in China fell due to lower exports to Europe and the US and a
combination of past monetary policy tightening and increased regulation of housing
speculation.
Emerging
economies
registered robust
growth
Figure 1: Real GDP growth, Estimates and Outlook - Annual percentage changes
Source: IMF WEO October 2012 and National Accounts 2011
b)
SUB-SAHARAN AFRICAN ECONOMY
6.
Sub-Saharan Africa (SSA) continued to record strong economic growth in 2010 and
2011, despite the weaker global economic environment, due to the
region‟s relatively limited exposure to the global economy. A
SSA‟s growth was
combination of favourable commodity prices and supportive
mostly driven by
macroeconomic policies saw regional output rise by 5.1 percent in
favourable
2011 compared to 5.3 percent in 2010, lead by rapid growth in both
commodity prices
resource-rich countries – such as Ghana (which registered growth of
8.0 percent in 2010 and 14.4 percent in 2011) and Nigeria (growth of
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Macroeconomic Framework
8.0 percent and 7.4 percent, respectively, in 2010 and 2011) – and low-income countries,
such as Rwanda (7.2 percent in 2010 and 8.6 percent in 2011) and Ethiopia (8.0 percent in
2010 and 7.5 percent in 2011).
Growth in South Africa, which is Namibia‟s principal trade partner,
remained fairly subdued at 3.1 percent in 2011 compared to 2.9
percent in 2010. South Africa‟s growth was impacted negatively by
the strain on exports posed by the Euro Zone crisis (South Africa‟s
major trading partner), a high unemployment rate that reduced local
demand for manufactured goods and currency weakness which
weighed on net exports.
7.
SA was severely
impacted by the EU
crisis and low local
demand
c)
DOMESTIC ECONOMY
(i)
Impact of global developments on the Namibian economy
8.
As a small and open economy, the lacklustre performance of the global economy has
impacted negatively on the Namibian economy. The slowdown in
global growth had a negative impact on Namibia‟s export-driven
Export-driven sectors
hard-hit
by low global
sectors – such as agriculture, fishing, mining and tourism – in 2010
demand
and 2011. To this end, the Euro Zone‟s sovereign debt crisis had a
particularly significant impact on Namibia as more than 25 percent
of Namibia‟s exports in 2011 were destined for that market, while if the UK, Switzerland
and Sweden (all of which continue to suffer from the fallout in the Euro Zone) are
included, this figure rises as high as 55 percent.
9.
In the sub-regional context, the impact on the Namibian economy was compounded by the
fact that the Euro Zone is also a major trading partner for South Africa, which, in turn, is
Namibia‟s single most significant trading partner.
10.
At 20.4 percent of total exports in 2010, South Africa is Namibia‟s major export
destination, followed by the UK at 15.1 percent, Angola at 8.0 percent and Spain at 5.8
percent. (Figure 2)
Figure 2: Namibia’s export destinations – percentages
25.0
20.4
20.0
15.1
15.0
8.0
10.0
5.8
5.6
5.1
5.0
4.9
4.7
Spain
Italy
France
EPZ
US
China
5.0
0.0
South
Africa
UK
Angola
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Macroeconomic Framework
Source: National Statistics Agency – 2010 trade statistics
11.
South Africa‟s dominance in international trade with Namibia is
accentuated by the fact that 72.0 percent of Namibia‟s imports
originated from that country. The other significant import figures
are 5.0 percent to the UK, followed by 3.4 percent to China, 2.7
percent to Germany and 2.0 to The Netherlands. These trade
statistics provides an indication of Namibia‟s exposure to the rest of
the world via the trade links with South Africa. (Figure 3).
With 72% of exports
and 20% of imports,
SA is Namibia‟s
major trading partner
Figure 3: Origin of Namibia’s imports – As percentages of total exports
As % of total imports
5.0
3.4
2.7 2.0
SA
UK
China
72.4
Germany
Netherlands
Source: National Statistics Agency – 2010 trade statistics
(ii)
Supply-side Developments
12.
The domestic economy performed relatively well in 2011 given the
fragility of the global economy. Although not as high as the 6.6
Higher growth in
2011 was due to the
percent achieved in 2010, the rate of growth of 4.8 percent seen in
secondary and tertiary
2011 remains acceptable. While lower than the average growth rate
industries
of 5.0 percent that was achieved over the previous 10 years, the 4.8
percent growth realized in 2011 was above the 4.2 percent estimate
of the Macroeconomic Working Group (MEWG) for that year. The stronger growth in
2011 was attributed to the secondary and tertiary industries which registered growth of 4.1
and 4.3 percent respectively, while primary industries recorded a contraction of 0.9 percent
(Table 2).
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Macroeconomic Framework
Table 2: Growth Rates of Industries (Constant, 2004 Prices) – Annual percentage changes
Industry
2009
Primary industries
Secondary industries
Tertiary industries
GDP at market prices
2010
- 24.5
0.2
4.8
-1.1
2011
14.3
9.4
4.1
6.6
Average
-0.9
4.1
4.3
4.8
Share of
GDP (%)
16.7
18.5
56.7
-3.7
4.6
4.4
3.4
Source: National Accounts 2011
13.
Primary industries (which accounted for 17 percent of nominal GDP in 2011) continue to
experience significant volatility, mainly due to the heavy weighting of mining activities in
the industries which are vulnerable to, inter alia, fluctuations in commodity prices,
unpredictable weather (for costal mines as well as alluvial diamond mining at sea), and
labour unrest. In 2009, primary industries contracted by 24.5 percent, before growing by
14.3 percent in 2010 and contracting again by 0.9 percent in 2011. Figure 2 illustrates the
highly erratic growth pattern of the primary industries
14.
Secondary industries recorded lower growth of 4.1 percent in 2011, compared to 9.4
percent in 2010, as a result of a significant reduction in manufacturing
Low growth in the
growth from 10.8 percent recorded in 2010 to 1.2 percent in 2011.
secondary
industries
However, construction activity remained strong and grew by over 16
was due to lower
percent in 2011 and, thus, helped to keep the growth of the industries
growth in
buoyant. Growth in construction was mainly due to an increase of
manufacturing
construction works carried out in the electricity and water sectors, as
well as general government construction activities. Residential and
commercial building activities also contributed to the construction boom as evidenced by
the robust growth of 21.7 percent in 2011.
Figure 4: Growth Rates of Industries (Constant, 2004 Prices) – Annual percentage changes
30.0
20.0
10.0
0.0
-10.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-20.0
-30.0
Primary industries
Secondary industries
Tertiary industries
Source: National Accounts 2011
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Macroeconomic Framework
15.
The secondary industries‟ share of GDP amounted to 19 percent in 2011. As illustrated in
Fig. 4, the growth of the secondary industries is less erratic than that of the primary
industries.
16.
Tertiary industries recorded a marginally higher growth rate in 2011 than in 2010 at 4.3
percent, up from 4.1 percent. This was due to a strong growth rate of 8.6 percent in
Education, along with growth rates of 5.1 percent in Community, Social and Personnel
Service Activities, 5.4 percent in Public Administration and Defence and 5.0 percent in
Financial Intermediation. The tertiary industries‟ share of GDP amounted to 57 percent in
2011. Figure 2 illustrates growth pattern of the tertiary industries is characterized by
relative smoothness.
(iii) Demand-side Developments
17.
Final consumption expenditure (FCE) was the main contributor to
Drop in private
GDP, from the expenditure perspective. However, its growth decreased
expenditure
caused
moderately to 4.2 percent in 2011 from 5.3 percent in 2010, mainly
a decrease in FCE
due to a significant drop in private expenditure. High household
indebtedness and high levels of unemployment, exacerbated by job
losses during the economic downturn in 2009, continued to weigh on consumer spending.
General government expenditure increased remarkably over the same period. (Table 3).
However, high base effects3 are likely to have played a role, too.
Table 3: Growth of Expenditure Aggregates - Annual percentage changes
Industry
2008
2009
2010
Final consumption expenditure
8.2
8.8
5.3
Private
9.0
9.7
5.6
General government
6.1
6.1
4.1
Gross fixed capital formation
7.2
-11.0
9.2
Exports of goods and services
5.2
-8.7
16.7
Imports of goods and services
9.6
4.1
2.2
Gross domestic product at market prices
3.4
-1.1
6.6
2011
4.2
2.5
9.4
0.6
0.4
2.8
4.8
Source: National Accounts 2011
18.
3
Gross fixed capital formation (GFCF/investment) registered growth of 0.6 percent of
GDP in 2011 compared to 9.2 percent in 2010. (Table 3 and Figure 5). Investment
activities are often sporadic and, given the size of the Namibian economy, a few large
projects (or an absence thereof) can have a big impact on the overall investment growth
The
consequence
of
abnormally
high
or
month distorting growth figures for the most recent month.
low
levels
of
growth
in
a
previous
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Macroeconomic Framework
rates. Savings recorded lower growth rates of 13.4 percent of GDP in 2011, compared to
15.5 percent in 2010 and 13.3 percent in 2009.
Figure 5: Growth of Expenditure Aggregates (Constant, 2004 Prices) - Annual percentage changes
20.0
15.0
10.0
5.0
0.0
-5.0
2008
2009
2010
2011
-10.0
-15.0
Final consumption expenditure
Gross fixed capital formation
Exports of goods and services
Imports of goods and services
Source: National Accounts, 2011
19.
The volatile performance of exports has been reflective of the erratic
performance of primary industries (See Table 3 and Fig. 5). Namibia
is, to a large extent, dependent on primary industries (mainly the
mining industries) for exports and is, therefore, vulnerable to
fluctuations in commodity prices.
20.
On the other hand, import growth has been smoother (as illustrated in Table 3 and Fig. 5),
mainly due to Namibia‟s reliance on imports for consumption. Figure 3 illustrates the high
correlation between final consumption expenditure and import growth. This presents a
number of challenges, particularly with respect to the balance of payments, since exports
cannot be relied upon to offset the impact of fairly steady import growth.
Namibia is dependent
on primary industries
for exports
(iv) Fiscal Developments
21.
The Government maintained an evolving expansionary fiscal policy
over the past MTEF period as reflected in the progressive expansion
in public spending (N$24.9 billion in 2009/10 to N$36.6 billion in
2010/11) over the review period, translating into an average budget
deficit of 4.3 percent.
Expansionary fiscal
policy caused an
expansion in public
spending
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Macroeconomic Framework
Table 4: Fiscal Developments for the 2009/10-2011/12 financial year (N$ millions)
ITEM
2009/10
2010/11
2011/12
Average
GDP
76 586
83 562
93 559
84 569
Revenue
% of GDP
Expenditure
% of GDP
Budget Balance
% of GDP
Total Debt
% of GDP
Total Guarantees
% of GDP
24 017
31.4
24 914
32.5
-897
-1.2
12 910
16.9
2 634
3.4
23 375
28.0
27 253
32.6
-3 879
-4.6
13 893
16.6
2 007
2.4
29 922
32.0
36 611
39.1
-6 689
-7.1
24 700
26.4
2 538
2.7
25 771
30.4
29 592
34.8
-3 822
-3.4
17 168
20.0
2 393
2.9
Source: Ministry of Finance, 2012
22.
As a result of the expansionary fiscal policy, total public debt increased to an average of
20.0 percent of GDP over the review period, rising from N$12.910 billion in 2009/10 to
N$24.700 billion in 2011/12. Total Guarantees amounted to an average of 2.9 percent over
the MTEF. (Table 4 and Figure 6)
Figure 6: Fiscal Developments for the 2009/10-2011/12 financial year (% of GDP)
50
40
30
Expenditure
20
Revenue
Budget balance
10
0
2009/10
2010/11
2011/12
-10
Source: Ministry of Finance, 2012
(v)
Repo rate developments
23.
The repo rate was lowered to 5.5 percent (from 6.0 percent, a rate
which had been applicable since 2010) in August 2012 in order to
rekindle domestic demand to mitigate the effects of weak global
growth. The impact of the reduction on inflation is likely to be
minimal because demand-pull inflation only constitutes less than 35
percent of Namibia Consumer Price Index (NCPI). What is of
The repo rate was
lowered to 5.5%
from 6.0% in
August 2012
Page 15
Macroeconomic Framework
particular concern, though, is the increasing private sector credit as a result of the low
interest environment and whether such credit is used for investment or consumptive
purposes.
(vi) Price developments
24.
NCPI accelerated to 7.1 percent in October 2012 from 6.6 percent
recorded in January 2012, bringing the average inflation for the first
Average NCPI for the
first 10 months of 2012
ten months in 2012 to 6.5 percent, which is significantly higher than
was 6.5% (higher than
the 4.7 percent average for the first ten months of 2011. High
the 4.7% for 2011)
inflation levels for 2012 are mainly attributed to food and transport
categories and the depreciation of the Namibia Dollar. This is on
account of food supply shortages as a result of industrial strikes in South Africa and the
observed increase in international food prices. The strikes - which started in the mining
industry and spread to the transport and logistics sectors - interrupted the delivery of
products to the market. Moreover, international prices for crude oil remained high and
volatile as many economies started to scale up the implementation of energy sanctions
against Iran.
Figure 7: NCPI and the Repo Rate - Annual percentage changes
Source: Macroeconomic Working Group 2012
25.
Figure 7 shows the percentage change in the NCPI since 2010 compared to South Africa‟s
CPI, Bank of Namibia‟s repo rate and the SADC target for inflation. Despite the low
interest rate environment, NCPI inflation has not only remained relatively low and stable
and in tandem with South Africa‟s CPI but was well below the SADC regional benchmark
of 10 percent over the review period.
(vii) Balance of Payments
26.
The balance of payments recorded a surplus in 2011 (which was a
turnaround from the significant deficit of the previous year), largely
BoP recorded a
surplus in 2011
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Macroeconomic Framework
due to a huge surplus in the capital and financial account (from a deficit during the
previous year). Namibia has consistently recorded excess savings over investments as
reflected by consistent surpluses in the current account. As a ratio of GDP, savings are
estimated at the level of 24.0 percent in 2011 and are expected to improve slightly in 2012.
(viii) Foreign Reserves
27.
The level of reserves improved at the end of 2011, recording N$14.6 billion compared to
N$10.2 billion at the end of 2010, a level that continued to be more than adequate to
maintain the peg with the South African Rand currency and also remained above the
international benchmark of three months of import cover.
(ix) Exchange rate developments
28.
29.
The Namibia Dollar (NAD) weakened against the US Dollar (USD) by
14.7 percent, against the Great British Pound (GBP) by 12.6 percent
and against the Euro by 4.9 percent during the first ten months of
2012. This was due to positive economic developments in some of the
advanced economies which contributed to the strength in the foreign
currencies.
NAD weakened
against the USD, GBP
and EUR in 2012
The depreciation of the NAD against the USD was primarily driven by GDP growth of 2.3
percent for the US in the third quarter, coupled with decreases in inflation and
unemployment rates. Similarly, the appreciation of the NAD against the Euro was driven
by lower inflation and the launch of the Outright Monetary Transactions (OMT)4
programmes by the European Central Bank (ECB) in September 2012, respectively.
(Figure 8)
4
The OMT is aimed at buying unlimited bonds and is meant to complement the existing European Stability
Mechanism program. These developments set off a relief in financial markets and, subsequently, led to the EUR’s
appreciation against the NAD
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Macroeconomic Framework
Figure 8: Namibia Dollar per foreign currencies
16.00
Monthly Averages
14.00
US$
12.00
British
Pound
10.00
Euro
8.00
6.00
4.00
J
M M
J
S
N
J
M M
J
S
N
J
M M
J
S
N
J
M M
J
S
Source: Bank of Namibia
30.
The trade weighted effective exchange rates5, namely the Namibia
The NEER and
effective exchange rate (NEER) and real effective exchange rate
REER
depreciated
(REER) of the local currency depreciated annually by 8.7 percent to
annually
89.8 and by 4.5 percent to 122.8, respectively. However, the REER
appreciated by 0.3 percent in the third quarter, implying that
Namibian export products became relatively expensive and, therefore, lost competitiveness
on the international market. (Figure 9)
5
The NEER is a trade weighted index of the nominal exchange rate of the Namibia Dollar against the currencies of
Namibia’s major trading partners, viz., the Rand, Pound Sterling, US Dollar, Euro and other economies. The REER,
on the other hand, takes the NEER and deflates it with the relative consumer price indices of Namibia and that of its
major trading partners.
Namibia’s effective exchange rate indices (NEER and REER) have been updated to a base year of 2004 to reflect its
main trading partners in that year
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Macroeconomic Framework
Figure 9: Trade weighted effective exchange rate indices
130
Index (2004 =100)
120
110
100
90
80
70
Q1
Q2
Q3
Q4
Q1
2008
Q2
Q3
2009
Q4
Q1
NEER
Q2
Q3
2010
Q4
REER
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Source: Bank of Namibia
(x)
Namibia’s Competitiveness
31.
International competitiveness ratings offer countries an opportunity to compare their
performances with those of other countries and identify areas where improvements are
needed to enhance competitiveness. Enhancement of international competitiveness
necessitates, amongst others, improvement of the general business environment, reduction
of the cost of doing business, improvement of access to finance, increased innovation,
enhancement appropriate skills development, increased labour market efficiency, improved
efficiency of public service delivery, deepening of public-private sector dialogue, etc.
32.
Namibia was rated highly on the World Bank Logistics Performance Index 2012 in that the
country was ranked only below Botswana and South Africa in Sub-Saharan region, mainly
due to the efficient transport logistics system. Overall, Namibia has been rank low on the
Global Competitiveness Index (World Economic Forum) and the Ease of Doing Business
Index (World Bank). Furthermore, the Namibia Business and Investment Climate Survey
highlighted difficulties experienced with regard to obtaining work permits for skilled
foreign nationals, general skills deficiency, difficulties with starting a business, etc.
(xi) Policy interventions to enhance competitiveness
33.
Sustainable economic growth can only be realized through the enhancement of Namibia‟s
global competiveness. The following are, amongst others, some of the policy interventions
that would enhance Namibia‟s competitiveness:

34.
Industrial Policy
The Industrial Policy entails a targeted approach towards industrial development by
focusing on the diversification of the economy, extension of the value chain of natural
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Macroeconomic Framework
resources, development of the manufacturing and services sectors as well as growth of the
small and medium enterprises. The Industrial Policy was tabled in Parliament in 2012.

35.
A Public-private Partnership (PPP) Policy entails a long-term contract
between a private party and a government agency for the provision of
a public asset or service. The private party bears significant financial
risk and management responsibility for the partnership. The PPP
Policy has been approved by Cabinet in 2012 and was subsequently
tabled in Parliament.

36.
Public-private Partnership Policy
PPP entails a
contract between the
public and private
sectors
National (Transport) Logistics Master Plan
Plans are underway to commission a National (Transport) Logistics
Master Plan to complement the corridor development initiatives and,
thus, buttress Namibia‟s position as a regional transport hub for the
landlocked SADC member states.
Namibia was rated
high on the Logistics
Performance Index
(xii) Economic, financial and credit surveillance

37.
The IMF conducts Article IV Consultations annually in order to assess issues pertaining to
member countries‟ fiscal sustainability and macroeconomic stability. To that end, the
IMF‟s Article IV Consultations for 2011 affirmed the Namibian Government‟s
commitment to the re-establishment of fiscal policy buffers, Reinforcement of monetary
and financial stability and the buttressing of several structural reforms.

38.
IMF Article IV Consultations
International credit ratings
A credit rating entails the expression of an opinion regarding the
Credit ratings assess
creditworthiness of an obligor with respect to a particular debt
the creditworthiness
security or other financial obligation. Over the years credit ratings
of obligators
have achieved wide investor acceptance as convenient tools for
differentiating credit quality. A favourable credit rating lowers the
cost of borrowing on the debt market and vice versa. The following ratings agencies
assessed Namibia‟s creditworthiness during the review period:
o
39.
Fitch Ratings
Fitch Ratings has affirmed Namibia‟s credit rating outlook as “stable” in December 2012
(it was downgraded to “stable” from “positive” in 2011). Fitch
Fitch affirmed
projects government debt at 26 percent of GDP at the end of 2012, a
Namibia‟s rating as
low level relative to peer rating (35 percent of GDP) and Namibia,
„stable‟ in December
including the sovereign, is a net external creditor (with net external
2012preciated
debt at -8.2 percent of GDP) due to past current account and budget
annually
Page 20
Macroeconomic Framework
surpluses. An expansionary fiscal policy (to support domestic demand in a difficult
external environment) has led to budget and current account deficits since 2009. However,
Fitch expects this trend to reverse gradually and for government debt to be at 28.5 percent
of GDP by 2015, which is still low relative to the peers.
o
40.
Moody’s Investor Services
Moody‟s Investor Services rated Namibia Baa3 with a stable outlook in 2011. The low
investment grade rating reflects the Government‟s track record of responsible budget
management and maintenance of low public debt as well as an investor-friendly policy
framework, balanced against structural legacy challenges posed by wide income
disparities, high unemployment and dependence upon the mining sector for foreign
exchange earnings.
(xiii) Job creation

41.
Although the GDP grew by 3.4 percent on average over the review period, the economy
failed to create jobs at commensurate rates. In fact, the formal economy shed more jobs 6
than it created new ones, thus, contributing to increased unemployment7. This was mostly
due to the fact that the primary industries recorded negative growth over the review period
because the extractive sectors are not only capital-intensive in nature but were also
subjected to negative commodity price fluctuations, labour unrests, etc.

42.
Economic growth with little/no job creation
Targeted Intervention Programme for Employment and Economic Growth
The Targeted Intervention Programme for Employment and Economic Growth (TIPEEG)
was conceptualised and implementation during the 2011/2012 financial year. It is a shortterm programme designed to create short-term jobs, fast track the implementation of
capital projects and render the unskilled force employable (through the encouragement of
on-the-job training). A total of approximately 25 3288 new jobs were created (7 326
permanent and 18 012 temporary) under TIPEEG, with Oshana Region having created the
highest number, followed by Oshikoto and Khomas Regions. (Table 5)
Table 5: Employment per Region
6
Namibia Labour Force Survey 2008
At 33.8% by broad definition and 21.1% strict definition (NHIES 2009/10) and
8 TIPEEG Implementation Report for 2011/2012 Financial Year
7
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Macroeconomic Framework
Region
Caprivi
Erongo
Hardap
Karas
Kavango
Khomas
Kunene
Ohangwena
Omaheke
Omusati
Oshana
Oshikoto
Otjozondjupa
TOTAL
Permanent
526
460
597
599
657
839
445
530
289
551
605
608
620
7,326
Temporary
1 200
1 019
1 290
1 313
1 612
1 451
1 001
1 243
1 131
1 347
2 006
1 915
1 484
18,012
Total
1 726
1 479
1 887
1 912
2 269
2 290
1 446
1 773
1 420
1 898
2 611
2 523
2 104
25,338
Source: National Planning Commission 2012
43.
Going forward, the targeted sectors of TIPEEG will be transferred to the NDP4 and,
therefore, the programmes and projects under TIPEEG will be
incorporated into and be harmonized with the medium term
TIPEEG will be
programmes. TIPEEG would, therefore, not be regarded as a standtransferred to NDP4
alone intervention programme but would form an integral part of the
Government‟s overall strategy to create employment opportunities.

44.
Having realised the potential of Small and Medium Enterprise (SME) to jointly create
substantial job opportunities, the government - in collaboration with other stakeholders like
the Development Bank of Namibia (credit facilities) and local authorities (for
infrastructure) - continue to render support the development of these entities. The apex of
such commitment is the eventual establishment of the SME Bank in December 2012.

45.
Small and Medium Enterprise Development
Human Resource Development Plan
Namibia‟s potential for economic growth (and by implication, increased job creation) is
hampered by, among others, the existence of mismatches between the supply of and
demand for skilled workers, opportunity costs of unemployment, rigid labour market
regulations, low labour productivity and insufficient investment in human resources
development. Hence, the government formulated the National Human Resource Plan
(NHRP) in order to deliberately address these and related challenges. This NHRP (which
has been approved by Cabinet in 2012) outlines the gap in sectors and employment
categories in order to highlight instances of undersupply and oversupply in the labour
market.
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Macroeconomic Framework
46.
It is envisaged that the NHRP (spearheaded by the NPC) would be
complemented by the Human Resource Development Plan (HRDP).
The HRDP (which would be managed by the Ministry of Education),
would focus on the development of skills and competencies that are
required by the industry and, hence, to close the gap in the labour
market. That is, whereas the NHRP focuses on skills audits and
human resources planning, the HRDP would be geared towards the
implementation of actual skills development/training programmes. The
be formulated.

The National Human
Resources Plan would
assess the
supply/demand for
labour
HRDP must still
Labour-based intervention measures
47.
The Government established an Employment Creation Forum with the mandate to
spearhead the national intervention measures aimed at increased employment creation. The
Forum will operate within the framework of the Employment Creation Commission Bill
which aims to promote the implementation of labour-based/intensive work; promote
investment in education, training, knowledge creation and targeted human recourses
development.
48.
Furthermore, programmes are underway for the promotion of
productivity and the introduction of the Integrated Employment
Information System (IEIS) to register jobseekers and find suitable
employment for them.
Job seekers will be
registered through
the Integrated
Employment
Information System
(xiv) Poverty alleviation

49.
Namibia is one of the countries with high rates of income inequality
The Gini-coefficient
in the world. However, some inroads have been made on the
was reduced from
reduction of income inequality as reflected in the reduction of the
0.60 to 0.58
Gini-coefficient to 0.58 (National Household Income and
Expenditure Survey, NHIES, of 2009/10), which is only marginally
below the level of 0.60 reported in the NHIES of 2003/04. A targeted of 0.3 is envisioned
under Vision 2030.

50.
Reduction of income inequality
Poverty reduction
Progress has been made with regards to poverty reduction in that the
proportion of the population classed as „severely poor‟9 dropped
The „severely poor‟
dropped from 14% in
2003/4 to 10%
2009/10
9
Based on a ‘cost of basic needs’ definition of poverty. The lower bound (severely poor) identifies those whose
expenditures are insufficient to meet their daily calorific requirement. The upper bound (‘poor’) indentifies those
whose expenditure is sufficient to meet daily calorific needs, but are still classed as poor. The thresholds were
updated between 2003/04 and 2009/10 to take account of inflation and allow for appropriate comparisons to be
made.
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Macroeconomic Framework
from approximately 14 percent in 2003/04 to around 10 percent in 2009/10 10. The
proportion classed as „poor‟ has also dropped, from around 28 percent in 2003/04 to about
20 percent in 2009/10.
51.
In terms of a broader definition of poverty, Namibia‟s Human Development Index 2011
(HDI)11 score continues to improve, rising to 0.625 in 2011 from 0.622 in 2010. This
placed Namibia‟s rank globally at 120 out of 187 countries in 2011, about mid-way in the
„Medium Human Development‟ category. Namibia‟s HDI rank is amongst the highest in
the Sub-Saharan African region, second only to Botswana. Furthermore, the HDI Report
shows that social poverty (as measured by education and health outcomes) has improved in
recent years, with life expectancy rising from 60 years in 2007 to 62 in 2011. Literacy rates
have also shown an improvement.

52.
53.
Effect of inflation on low-income earners
The NCPI measures the consumption/spending patterns of „the
average Namibian‟. However, in reality, consumers have different
spending patterns. Therefore, a single inflation rate for the whole
economy disguises important differences among different consumer
groups. For this reason, a simple inflation model12 was created to
illustrate the inflation faced by different income groups and different
segments of Namibian society.
NCPI measures the
consumption of the
„average‟ Namibian
In this regard, Figure 10 shows that the bottom 10 percent (bottom decile13) of income
earners generally faced higher food inflation than both the top 10 percent (top decile) of
income earners and the average income earner. This is because the poorest in society spend
a higher proportion of their income on food, which has faced high levels of inflation in
recent years.
10
NHIES 2009/10
The HDI is based on health, education and per capita income statistics. See the UN Human Development Report
2011 for more detail.
12
This was done using the consumption data from the 2009/10 NHIES and then applying these consumption
patterns to monthly inflation data (which is broken down by different categories of goods/services).
13 A rating, usually of performance, on a scale of 1 to 10 where 1 is best, 10 is worst, and each number corresponds
to an increment of 10 percentage points.
11
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Macroeconomic Framework
Figure 10: Poverty inflation analysis - Annual percentage changes
20.00
15.00
10.00
5.00
Bottom Decile
2008
-5.00
2003
0.00
Top Decile
Overall Inflation
Food and Beverage inflation
Sources: NSA, NHIES 2009/10 and Macroeconomic Working Group 2012
54.
The difference in inflation faced by different segments of society shows that the most
vulnerable in society may often face higher inflation than presented by the overall NCPI.

Housing for low-income earners
55.
Land delivery across the country continued to deteriorate in contrast to the growing
demand over the review period, a situation that causes a rise in prices. The situation has
been aggravated by the local authorities‟ land auctioning system (land transactions provide
an important source of revenue for these institutions), the rising middle class and the
participation of non-residents in the property market.
56.
Subsequently, the supply of lower priced properties continued to diminish,
while upper-priced properties were selling both too slow and below asking
price, over the review period (Figure 11). Generally, local property prices
were on average 3114 percent higher than those in South Africa.
14
The supply of
lower-priced
properties
diminished
FNB Housing Index, August 2012
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Macroeconomic Framework
Figure 11 – Index of land supply
120
100
Number of stands
80
60
40
20
Feb-12
Oct-11
Jun-11
Feb-11
Oct-10
Jun-10
Feb-10
Oct-09
Jun-09
Feb-09
Oct-08
Jun-08
Feb-08
Oct-07
Jun-07
Feb-07
Oct-06
Jun-06
0
Source: FNB Housing Index 2012
(xv) Fourth National Development Plan (NDP4)
57.
The Fourth National Development Plan (NDP4, launched in July 2012)
NDP4 seeks to
adopted three overarching goals namely, high and sustained economic
transform the
growth, employment creation and improved income equality. To attain
economy and create
these goals, key focal sectors (logistics, tourism, manufacturing and
the momentum for
growth
agriculture) have been identified to transform the economy and create
the necessary momentum for high and sustained growth. To increase the
country‟s competitiveness and crowd in private investment, government will increase
investment in critical infrastructure developments in the transport, energy, water and
housing sectors.
58.
Although there are many basic economic development enablers, the most important ones in
the context of the NDP4 are the creation of an enabling institutional environment,
improvement of education and skills development (with an emphasis on vocational
training) and establishment of a good quality health system. Furthermore, NDP4 focuses
on the efficiency of implementation as well as monitoring and evaluating strategies for the
various sector programmes.
59.
The underlying principle of the NDP4 implementation strategy comprises prioritisation,
assertiveness and simplicity, implying that that sectors are required to indentify, prioritise
and implement programmes that would contribute towards the attainment of the three
overarching goals. Such programmes have to be outlined in the sector-strategic and annual
execution plans. The implementation process would be buttressed through continuous
monitoring, evaluation and progress reporting systems to instil a sense of accountability
among the implementing agencies.
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Macroeconomic Framework
(xvi) Subsidies and transfers to State-owned Enterprises (SOEs)
60.
The total amount of subsidies and transfers effected to a broad range of
State-owned Enterprises (SOEs) over the 2007/08-2010//11 financial
years amounted to approximately N$6 billion, a substantive amount
which, in terms of opportunities costs, implies the compromise of several
social and economic interventions and programmes.
Transfers to
SOEs could have
been used for
other purposes
(xvii) Revision of the incentives regime
61.
Namibia‟s incentives regime is perceived to be overly generous, complex and subjected to
abuse. To that end, the country‟s incentives regime (incentives for manufacturing and EPZ
enterprises) is being reviewed for harmonisation with best international practices.
(xviii) Regional economic integration
62.
The SADC regional integration agenda is based on the Regional
Indicative Strategic Development Plan (RISDP) that seeks to align the
development priorities of the Member States by setting the framework for
consistent and comprehensive programmes of long-term economic and
social development policies. Several protocols are in place to provide the
legal framework for co-operation among Member States, for example, the
Protocol on Finance and Investment, Protocol on Trade, etc.
SADC regional
integration
agenda is based
on the RISDP
63.
The combination of the implementation of the RISDP, SADC‟s Economic Partnership
Agreement (EPA) with the European Union in 2014 and the introduction of the Free Trade
Area (FTA) among SADC, Common Market for Eastern and Southern Africa (COMESA)
and East African Community (EAC) over the same time horizon (in addition to the
possible review of the SACU Revenue Sharing Formula) would have an overall revenuereducing effect for Namibia.
C.
MEDIUM TERM ECONOMIC OUTLOOK
a)
GLOBAL ECONOMIC OUTLOOK
64.
Figure 12 illustrates that growth trends in the advanced economies, emerging markets and
the Euro Zone will be characterised by a marginally upward trajectory over the MTEF
period, with the lowest rate of growth to take place in the Euro Zone. Meanwhile, SubSahara Africa‟s growth pattern is expected to be relatively flat over the same period.
65.
The outlook for the world output is relatively positive in that average
growth of 4.2 percent is expected (Table 6 and Figure 12). Over the
nearer term, however, downside risks that entail possible intensification
of the sovereign debt crisis in the Euro Zone as well as the fiscal
challenges in the USA remain elevated. Global growth presents a mixed
picture in 2012 but with moderate overall growth expected.
World output is
expected to record
average growth
rate of 4.2%
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Macroeconomic Framework
Table 6: Outlook for the World Output, Real GDP – Annual percentage changes
Region/Country
Estimate
Projection
World Output
Advanced economies
United States
Euro Zone
Emerging/developing economies
China
India
Sub-Saharan Africa
Angola
Namibia
South Africa
2012
2013
2014
2015
2016
3.3
1.3
2.2
-0.4
5.3
7.8
4.9
5.0
6.8
4.0
2.6
3.6
1.5
2.1
0.2
5.6
8.2
6.0
5.7
5.5
4.3
3.0
4.1
2.3
2.9
1.2
5.9
8.5
6.4
5.5
5.4
4.3
3.9
4.4
2.6
3.4
1.5
6.1
8.5
6.7
5.8
5.4
4.4
4.1
4.5
2.6
3.4
1.7
6.1
8.5
6.9
5.7
5.2
4.4
4.1
Average
2013-16
4.2
2.3
3.0
1.1
5.9
8.5
6.5
5.7
5.4
4.3
3.8
Source: IMF WEO October 2012
66.
Advanced economies are projected to grow at a low average rate of 2.3 percent over the
period under review, mainly due to low overall growth prospects and a high degree of
uncertainty caused by the Euro Zone sovereign debt problems, especially those faced by
Greece, Spain and Italy.
67.
Emerging and developing economies are forecast to continue
posting robust growth over the medium term, albeit at rates that are
lower than those that prevailed prior to the global economic downturn
largely due to weaker demand in advanced economies. These
economies are projected to grow at an average rate of 5.9 percent,
driven by China’s growth that is forecast to average a high 8.5
percent.
Emerging &
developing
economies are
expected to record
the highest average
growth rate of 5.9%
Figure 12: Global GDP estimates and projections – annual percentage changes
8
6
4
2
0
-2
2009
2010
2011
2012
2013
2014
2015
2016
-4
-6
World output
Euro zone
Emerging econ/developing econ
Advanced economies
Sub Saharan
Namibia
Source: IMF WEO October 2012 and The World Bank: Global Economic Prospects, June 2012
Page 28
Macroeconomic Framework
68.
Sub-Sahara Africa (SSA) is projected to register a robust average
growth of 5.7 percent, which is only marginally lower than the 5.9
SSA is projected
to
register robust
percent forecast for all emerging and developing economies. Growth
average growth of
in SSA will be underpinned by continued strong growth in oil5.7%
exporting countries, with Nigeria and Angola (the region‟s second and
third largest economies) forecast to average growth of 5.4 percent and
6.7 percent, respectively, over the MTEF period. Angola‟s growth will be boosted by the
commissioning of a US$9 billion liquefied natural gas project and the expected increase of
oil production to over two million barrels per day.
69.
However, South Africa (the region‟s largest economy) is expected to experience subdued
growth over the same time frame as economic activity is weighed down by its close
linkages with Europe. Although growth is projected to expand by 3.8 percent on average,
persistent global uncertainties imply that downside risks remain high. Furthermore, growth
prospects will be affected negatively by the industrial unrests that occurred during the latter
part of 2012.
70.
Beyond the ongoing problems in Europe and the US, slowing growth
in China poses a risk to SSA growth, not only because of deepening
trade linkages between SSA and China, but also due to China‟s
increasingly important contribution to the region‟s foreign direct
investment and the potential impact that the slower growth in the
world‟s second largest economy could have on global commodity
prices.
b)
DOMESTIC ECONOMIC OUTLOOK
71.
The estimates and projections of the growth rates are based on a range
of assumptions concerning domestic, regional and international
developments. Some of these assumptions are endogenous (actions by
Government that will impact on growth) while others are exogenous
(factors outside Government‟s control that will impact on growth).
China is
increasingly
gaining great
importance in
SSA
Projections are
based on a range
of assumptions
(i)
Central (baseline) growth scenario 15
72.
The central (baseline) growth scenario is based on the assumption that the current
challenges and downside risks to global economy will persist unabatedly over the medium
term. These risks are, inter alia, low growth in the US, coupled with high unemployment
and significant fiscal debt, the Euro Zone‟s sovereign debt crisis, Japan‟s low corporate
and private spending and slowing demand for exports from emerging economies,
particularly from China. (Table 7)
15 This scenario is based on research, analyses and simulations of the Macroeconomic Working Group and
represents the ‘most-likely scenario’.
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Macroeconomic Framework
Table 7: Outlook for GDP growth for the 2013/14-2015/16 MTEF – Annual percentage changes
Average
2011
2012
2013
2014
2015
2016
2013-16
Actual
Estimate
Projections
Central estimate
4.8
4.0
4.3
4.3
4.4
4.4
4.3
Source: National Accounts 2011 and Macroeconomic Working Group 2012
73.
The projections in the baseline scenario (Table 7) are marginally lower than those of the
MTEF for the 2012/13-2014/15 period (Table 8), which is a reflection of the expected
sluggish global economic developments and their impact on the domestic economy.
Table 8: Outlook for GDP growth for the 2012/13-2014/15 MTEF – Annual percentage changes
Average
2010
2011
2012
2013
2014
2015
2012-15
Actual
Estimate
Projections
Central estimate
6.6
4.2
4.4
4.8
4.9
5.0
4.8
Source: National Accounts 2010 and Macroeconomic Working Group 2011
(ii)
Supply-Side Projections

74.
Primary industries
Primary industry is expected to record 3.0 percent growth on average over the MTEF
period, mainly on the back of robust growth in the other mining and
quarrying sub sector (Table 9 and Figure 13). Other mining and quarrying
Growth will be
driven by the
is expected to grow above 10.0 percent on average, driven by growth in
other
mining and
uranium mining as a result of the expected commissioning of the Husab
quarrying suband Etango16 mines and expansion of capacities of the Langer Heinrich
sector
and Rössing17 uranium mines. On the other hand, diamond mining is
projected to grow by only 1.7 percent on average over the same period.
Table 9: Central estimate for GDP Growth by Industry – Annual percentage changes
Industries
2011
2012
2013
2014
2015 2016
Actual
Estimate
Projections
Primary Industries
-0.9
4.0
2.0
3.1
2.6
3.0
Secondary Industries
4.1
6.7
7.2
6.2
5.7
4.3
Tertiary industries
4.3
3.0
3.1
3.1
3.6
3.9
GDP
4.8
4.6
4.3
4.3
4.4
4.4
Source: National Accounts 2011 and Macroeconomic Working Group 2012
Average
2013-16
3.0
6.0
3.3
4.3
16
The commissioning of Etango has been shelved pending the improvement in uranium prices.
17 Rossing’s 7-year waste-stripping programme is aimed at improving the production output by 2014. The process
entails the removal of blasted rock that does not bear sufficient uranium and is, therefore, not economical to
process. It is undertaken in order to ensure that the mine remains operative until its expected closure date of 2023.
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Macroeconomic Framework
75.
The agriculture and fishing and fish processing on board sectors are projected to grow by
only 2.0 percent on average during the period under review. The slow growth in agriculture
is attributed to the livestock farming subsector, which is expected to decline by 5.0 percent
in 2012 due to restocking. However, the crop farming subsector is projected to maintain
steady growth of 3.0 percent on average due to continued Government intervention and
support through the Green Scheme. The fishery sector is expected to record an average
growth rate of 2.0 percent as a result of continued sustainable quota management.

Secondary industries
76.
Overall growth of the domestic economy over the MTEF period is
Main drivers of
expected to be underpinned by the strong expansion of the secondary
growth will be
sector, which is expected to average 6.0 percent growth. The main
the construction
drivers of growth in secondary industries will be the construction and
and electricity
electricity and water sectors which are expected to grow by 11.9 and 8.6
and water sectors
percent on average, respectively over the MTEF. The growth in the
construction sector will mainly be driven by, amongst other projects, the
Walvis Bay port expansion, the construction of Gecko Industrial Park 18 the Neckertal Dam
and the Kudu Gas projects.
77.
The manufacturing sector is projected to grow by 3.8 percent on average during the period
under review, mainly driven by the other food products and beverages and other
manufacturing sub-sectors which are expected to grow by 4.6 and 3.5 percent on average,
respectively. Growth in the other food products and beverages sub-sector will be due to
expected expansion in beer and milk production as well as the coming onto stream of a
new poultry plant, while the growth in other manufacturing will be due to increased
activities in diamond cutting and polishing, as well as other mineral beneficiation.
Figure 13: Estimates and projections for industries – annual percentage changes
8.0
6.0
4.0
2.0
0.0
2012
Primary industries
2013
2014
Sedondary industries
2015
Tertiary industries
2016
GDP
Source: Macroeconomic Working Group 2012
18
Plants for sulphuric acid, soda ash, bicarbonate, caustic phosphoric acid and TVC desalination. . Plans are afoot
to develop a port for export/import of bulk commodities and a desalination plant. It is located in the Doro National
Park, around 10 km to the north of Swakopmund.
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Macroeconomic Framework

Tertiary industries
78.
Tertiary industries are expected to register a relatively low growth rate
Growth will be
of 3.3 percent on average over the MTEF period. However, given that
driven by financial
tertiary industries accounted for 57 percent of GDP in 201119, these
intermediation,
industries will be the largest contributor to overall GDP growth. The
transport and
main drivers of growth within the tertiary industries will be financial
communication
intermediation, transport and communication and wholesale and retail
sectors, which are expected to register average growth rates of 5.2 percent, 3.8 percent and
3.3 percent, respectively.
79.
The growth in transport and communication can be attributed to the commissioning of the
West Africa Cable System (WACS) as well as the expected expansion of the Walvis Bay
port. Meanwhile, the hotels and restaurants sector is expected to record slow growth during
the MTEF period due to slow growth in the Euro Zone and, thus, limited demand for
luxury goods such as holidays.
(iii) Demand-Side Projections
80.
19
Following a sharp acceleration in 2012, total consumption growth is
Total consumption
projected to slow over the MTEF period due to an expected
growth will slow
substantial decline in government expenditure. Public spending is
over the MTEF
forecast to grow in line with inflation over the 2013-16 period,
period
meaning that growth in real terms will be zero. However, headline
consumption will be kept buoyant by continued robust growth in
private expenditure, which is projected to expand by an average 5.7 percent over the
MTEF period. This will contribute towards steady total consumption growth of an average
4.3 percent over this time frame. (Table 9 and Figure 14).
National Accounts 2011.
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Macroeconomic Framework
Table 10: Outlook for GDP Growth - Expenditure approach, percentage growth
2011
Final Consumption Expenditure
Of which Private
Of which Public
Gross fixed capital formation
Exports of goods and services
Imports of goods and services
GDP in constant prices 2004
2012
Actual Estimate
4.1
6.7
2.4
4.5
9.4
13.2
0.4
10.8
-4.5
4.5
2.9
4.0
4.9
4.0
2013
2014
2015
2016
4.0
5.4
0.0
9.7
4.1
6.0
4.3
4.3
5.8
0.0
10.6
6.3
6.0
4.3
Projections
4.9
3.9
6.5
5.1
0.0
0.0
3.5
8.2
5.7
6.3
4.0
4.6
4.4
4.4
Average
2013-16
4.3
5.7
0.020
8.0
5.6
5.1
4.3
Source: Macroeconomic Working Group 2012
81.
Investment is projected to record strong growth over the MTEF period,
following low growth of just 0.4 percent in 2011. Growth is forecast to
average 8.0 percent, boosted by the construction of several large-scale
capital projects such as the Husab and Etango uranium mines, the
Neckertal Dam and the Kudu Gas projects. The anticipated dip in
investment growth in 2015 is explained by a combination of the expected
completion of the aforementioned projects and high base effects in 2014.
Investment
growth will be
boosted by large
construction
projects
Figure 14: Outlook for GDP Growth (constant 2004 prices) - Expenditure approach
Source: Macroeconomic Working Group 2012
82.
Export growth is forecast to average 5.6 percent over the MTEF period as the global
economy is expected continues to recover, albeit at a subdued pace. Exports are expected
to maintain steady growth over the outer of the MTEF period, mainly due to the positive
outlook for the prices of Namibia‟s export commodities.
20
These are expressed in constant/real prices which take inflation into account. Hence, in current/nominal prices
(without inflation), growth would be at least at the level of inflation and would, therefore, not be equivalent to zero.
For example, if the average inflation rate in 2013 is 5.2 percent, then the current/nominal GDP growth rate in that
year would be 5.2 percent.
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Macroeconomic Framework
83.
Import growth is projected to average growth of 5.1 percent over the MTEF period,
although growth will be stronger during the 2013-14 period as demand for capital goods
(to be imported) will be boosted by planned construction projects. Following the
completion of these projects around 2014, import growth is projected to slow to below 5.0
percent over the outer years of the MTEF.
(iv) Price developments
84.
Going forward, inflation is expected to increase moderately over the remainder of 2012
and the beginning of 2013 before subsiding gradually from around mid-2013, that is, in
line with downward projections for oil prices. International food prices are forecast to
decline in 2012 before rising gradually over the MTEF period.
c)
OIL, FOOD AND COMMODITY PRICES
(i)
Oil Prices
85.
Brent Crude21 futures anticipate oil prices to exhibit a steady decline
Oil prices are
over the MTEF period, falling below US$100 per barrel around May
expected to decline
2015 due to a combination of an improved outlook for supply and a
steady due to
weaker situation on the demand front. However, going forward,
improved supply
geopolitical tensions in the Middle East (Syrian and Israeli-Palestinian
outlook and weaker
situation
conflicts) could draw in other countries and so possibly disrupt oil
supplies from a region which accounts for around 33 percent of total
global supply. In addition, the weak global economic outlook that does generally not bode
well for demand. (Figure 15)
86.
As advanced economies are forecast to register a low average growth of 2.3 percent over
the MTEF period, it will increasingly be emerging and developing economies (projected to
growth on average by 5.9 percent) that will drive demand for oil. Although oil prices are
likely to be well-supported over the medium term, they are expected to trend lower over
the same period.
21 The predominant price benchmark outside the North American market
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Macroeconomic Framework
Figure 15: Oil price futures
120.00
115.00
US$/bbl
110.00
105.00
100.00
95.00
90.00
85.00
Nov-16
Sep-16
Jul-16
May-16
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Jan-15
Mar-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
Mar-13
May-13
Jan-13
80.00
Source: CME Group 16/10/12
87.
On the downside, the above-outlined outlook may be negated by the likely impact of
Hurricane Sandy on the supply of oil. The damage to infrastructure caused along the US
East Coast (which resulted in the closure of refineries, roads and airports), is likely to
diminish the supply of energy in the US (the world's biggest oil consuming nation)
(ii)
Food prices
88.
Having posted high prices in recent years, overall food prices are
forecast to decline in 2012 – despite the droughts experienced in the
US and in Eastern Europe – before gradually rising again over the
MTEF period. Although food prices are expected to come down from
recent peaks, they are nonetheless expected to remain around
historically high levels. This trend is illustrated in Figure 14 which
shows an overall food price index derived from the OECD-FAO
projections22.
89.
Food prices are
forecast to decline
in 2012 before
gradually rising
again over the
MTEF period
The decline in prices in 2012 will be triggered by a combination of excess supply (as
global production continues to respond to previous high prices), rebuilding of stocks and
weaker demand on the back of slower global growth. However, towards the outer years of
the MTEF, demand is expected to rebound and this, combined with rising production costs
and growing demand for bio fuels, will keep the prices of agricultural products wellsupported over the remainder of the outlook period. (Figure 16)
22
The index is created using price and consumption data across the following agricultural commodity sub-sectors:
Cereals, Oilseeds, Meats, Dairy, Sugar and Fisheries.
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Macroeconomic Framework
Figure 16: Food price index (2009=100)
130.0
125.0
120.0
115.0
110.0
105.0
100.0
95.0
90.0
2009
2010
2011
2012
2013
2014
2015
2016
Source: OECD-FAO Agricultural Outlook 2012-2021, MoF Calculations
(iii) Diamond and Metals

90.
Diamonds
Unlike other commodities, diamonds do not do not have a common
Going forward, the
benchmark and this makes price forecasting for diamonds a difficult
medium-term
task. However, there is general consensus that, while diamond prices
outlook is
are likely to remain subdued over the near-term as demand remains
promising for
weak against a backdrop of lacklustre global growth, the medium-term
diamonds
outlook is positive as constrained output is expected to struggle to
match growing demand, particularly from developing countries such as China and India.

91.
Uranium
Uranium prices continue to suffer in the wake of the Fukushima
disaster, but futures contracts are anticipating that uranium prices will
gradually head higher over the MTEF period. Uranium‟s longer-term
prospects remain positive as an increasing number of countries – most
notably China – look towards nuclear power to fulfil their energy
needs, which should result in stronger demand, going forward. (Figure
17)
The long term
prospects are
positive for
uranium
Nov-16
Sep-16
Jul-16
May-16
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
52.00
50.00
48.00
46.00
44.00
42.00
40.00
Jan-13
US$/lb
Figure 17: Uranium Price Futures
Source: CME Group 16/10/12
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Macroeconomic Framework

92.
Copper
Copper prices have experienced a meteoric rise in recent years, driven
in large part by insatiable demand from China. However, prices are
expected to trend down over the MTEF period as weak global growth,
twinned with rising mine output, applies downward pressure on prices.
(Figure 18)
Copper prices are
expected to trend
downwards due to
weak global growth
and rising mine
output
Figure 18: Copper Prices
10000
9000
US$/t
8000
7000
6000
5000
2011
2012
2013
2014
2015
2016
Source: World Bank Commodity Price Forecast Update, September 2012

Zinc
Although zinc prices are forecast23 to fall in 2012 due to weak global
Zinc prices are
growth, they are expected to rebound strongly over the medium term
expected to rebound
as some of the world‟s largest zinc mines are set to close, for example,
over the MTEF due
the Century Mine in Australia, plus other closures and contractions in
to several supply
Kazakhstan, Canada and Ireland that put a considerable strain on
constraints
supply. Moreover, lower prices of late have already delayed the
development of new mines that are needed to replace those nearing exhaustion. (Figure 19)
93.
Figure 19: Zinc Prices
USc/kg
300.00
250.00
200.00
150.00
2011
2012
2013
2014
2015
2016
Source: World Bank Commodity Price Forecast Update, September 2012
23
The World Bank
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Macroeconomic Framework
D.
CONCLUSIONS
94.
The domestic economy is projected to grow at an average rate of 4.3 percent over the next
three-years. However, that growth rate falls short of the NDP4 average target growth rate
of 6.0 percent over the next five-year period. Thus, it would be difficult to realise the
NDP4 objectives if the current growth trajectory is not raised.
95.
Therefore, the strategy over the MTEF would entail the implementation of policy
interventions that are aimed at the introduction of remedial measures to address structural
weaknesses in the economy. Such interventions would revolve around the attainment of the
priority goals identified in the NDP4, namely those of high and sustained economic
growth, employment creation and increased income equality.
96.
The precondition for the realisation of high and sustained economic growth is pillared on,
amongst others, the unlocking of latent business potential, improvement of business
operating conditions and enhancement of Namibia‟s competitiveness.
E.
WAY FORWARD
97.
Going forward, the following key policy reform areas were highlighted to enhance
Namibia‟s competiveness in order to address the core challenges of economic growth, job
creation and increased income equality:
98.
Industrial Policy Implementation (Ministry of Trade and Industry): To provide a policy
framework for the national industrial development process to unfold in that it entails a set
of intervention measures that are designed to promote or bring about structural change to
the economy in order to realize desired outcomes;
99.
Public-Private Partnership (PPP) Policy (Ministry of Trade and Industry): To provide a
framework for the implementation of capital and skills-intensive projects between the
public and private sectors. The key elements of a PPP undertaking are joint investment
and shared authority, responsibility, liability and risk-taking for mutual benefit.
100. National (Transport) Logistics Master Plan (Ministry of Works and Transport): To
complement the corridor development initiatives and, thus, to buttress Namibia‟s position
as a regional transport hub for the landlocked SADC member states;
101. Human Resources Development Plan (Ministry of Education): To expedite the
harnessing of resources for the development of the required skills and competency as
outlined in the National Human Resources Plan;
102. State-owned Enterprise Reforms (Office of the Prime Minister): To expedite the reform
of State-owned Enterprises (SOEs) in order to optimise their contributions to the economy
and to reduce their dependence on budget transfers; and
103. Enhancement of Namibia’s Competitiveness (Ministries of Trade and Industry,
Education, Labour and Social Welfare and Health and Social Services): To enhance
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Macroeconomic Framework
Namibia‟s business operating conditions by focusing on, amongst others, the development
of the health and primary education sectors and improvements in respect of technological
readiness, goods market efficiency, labour market efficiency, business sophistication and
innovation.
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Macroeconomic Framework
ANNEX A:
a)
OVERVIEW OF DOMESTIC ECONOMIC DEVELOPMENTS
Monetary and Financial Market Developments
104. Credit extended to the private sector remained generally healthy despite a reduction in
growth at the end of 2011 as a result of significant repayments, predominantly of
overdrafts, by businesses. At the end of 2011 growth slowed to 9.8 percent compared to
10.9 percent at the end of 2010. Nevertheless, corporations in the retail and construction
sectors borrowed extensively, that is, in addition to the robust demand from individuals for
credit in response to the expansionary monetary policy conditions that prevailed.
105. The growth in credit extended to the corporate sector slowed significantly to 5.8 percent
at the end of 2011 compared to 14.1 percent at the end 2010. This growth level is the
lowest seen in five years, a situation that reflects the volatile borrowing pattern of the
corporate sector. The period under review was characterized by high and volatile levels of
usage of overdraft facilities to finance working capital as well as construction activities
over short periods of time.
b)
Capital Market Developments
106. Developments on the Namibia Stock Exchange (NSX) in 2011 were affected by
developments in the global financial markets which were largely influenced by the
implementation of unconventional monetary policies in major advanced economies in
response to a number of shocks on the global economy. Thus, quantitative easing in the US
and the sovereign debt problems in the Euro Zone were reflected in some of the
performance indicators of the NSX over the same period. The Overall Index dropped by 29
points at the end of 2011 to close at 838.2 points compared with 867.2 at the end of 2010.
Consequently, market capitalization at the end of 2011 declined to N$1.1 trillion,
representing a decline of 2.5 percent when compared to the closing amount at the end of
2010.
c)
Exchange Rate Developments
107. The performance of the Namibia Dollar was mixed over 2011, experiencing appreciation
against the US Dollar but depreciation against the British Pound and the Euro. The
appreciation was largely due to uncertainty over US Government debt and political
brinkmanship resulting in delays in raising the debt ceiling. The Euro‟s strengthened
position was attributable to the implementation of remedial measures aimed at attempting
to mitigate the effects of the debt crisis and the European Central Bank‟s prudent monetary
management policies.
108. The depreciation/weakening of the Namibia Dollar has been in line with other emerging
market currencies, as global risk aversion continues (and investors favour „safe havens‟
such as Germany).
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Macroeconomic Framework
d)
External Sector Developments
109. The capital and financial account recorded a surplus of N$4.0 billion in 2011, compared
to a deficit of N$2.3 billion in the previous year. The improvement arose mainly from
significantly increased inflows of foreign direct investment into Namibia, a reduction in the
net outflows from portfolio investment, following the issuance of the Euro bond, and
substantial increases in SACU receipts. Outflows in other investment – short term,
however, remained high mainly due to excess liquidity experience by the local commercial
banks.
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Macroeconomic Framework
ANNEX B:
DIFFERENT GROWTH SCENARIOS
110. The alternative estimates and projections for growth over the next MTEF are based on the
following two principal scenarios (Table 8).
Table 8: Outlook for overall GDP growth (2004 prices) – Annual percentage changes
2011
Upper Estimate
Central Estimate
Lower Estimate
Actual
4.8
4.8
4.8
2012
Estimate
4.2
4.0
3.8
2013
4.4
4.3
4.0
2014
4.4
4.3
4.0
2015
Projections
4.5
4.4
4.1
2016
Average
2013-16
4.4
4.4
4.0
4.4
4.3
4.0
Source: National Accounts 2011 and Macroeconomic Working Group 2012
a)
Upper Estimate
111. This scenario is based on the assumption that the current global environment and downside
risks to global growth (as outlined in scenario 1) ease/moderate and that upside
opportunities that are conducive for global economic recovery and growth prevail. It is, as
such, the scenario that represents the „most likely best-case scenario‟.
b)
Lower Estimate
112. This scenario is based on the assumption that the current global environment and downside
risks pertaining thereto (as outlined in scenario 1) intensify, most notably that the current
deceleration of growth in China continues, possibly resulting in a hard-landing. Therefore,
it represents the „most likely worst-case scenario‟.
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Macroeconomic Framework
ANNEX C:
a)
ASSUMPTIONS FOR GDP ESTIMATES AND PROJECTIONS
INTERNATIONAL AND REGIONAL ASSUMPTI ONS

Global output is projected to grow at a rate of 3.3 percent in 2012 and 3.6 in 2013.
Global growth is forecast to remain above 4 percent to 2016.

Advanced economies are projected to grow at a collective rate of 1.3 percent and
1.5 percent in 2012 and 2013, respectively.

International inflation is projected to be 4.0 percent and 3.7 percent in 2012 and
2013, respectively.

World trade volume is estimated to grow by 3.2 percent in 2012 and 4.5 in 2013.

In general, volatility of commodity prices have been on an upward trend since 2010
and reached peak point in mid 2011 and have since been on a downward trend.

Brent Crude futures anticipate oil prices to exhibit a steady decline over the MTEF
period, falling below US$100 per barrel around May 2015 due to a combination of
improvements in supply prospects and weak demand-side developments.

The USD-NAD exchange rate is expected to fluctuate around the 8.2 mark (within
the range of 7.6 to 8.8) over the MTEF period. Short term appreciation and
depreciation can, however, be expected beyond these levels. For the sake of the
MEF projections, the exchange rate was presumed to remain unchanged.
b)
DOMESTIC ASSUMPTIONS
(i)
Supply Side Assumptions

24
Primary Industries
o
Primary Industries are estimated to register a higher growth rate in 2012 than 2011
due to robust growth in the mining and quarrying sector, in particular the other
mining sub-sector.
o
Diamond production is expected to decline due to the depletion of the onshore
resources while uranium production will improve on the back of increased unit
prices (over the outer years of the MTEF) and the commissioning of new uranium
mines such as Husab and Etango24and increased production capacities of Langer
Heinrich and Rössing mines will bode well for this sub-sector.
The commissioning of Etango has been shelved pending the anticipated improvement in uranium prices
Page 43
Macroeconomic Framework


o
Livestock farming is expected to continue to growing moderately over the
medium term, however is estimated to record negative in 2012 due to restocking.
Going forward, positive growth is expected.
o
Following a difficult year in 2011 due to flooding, crop farming sector is
expected to grow moderately, mainly due to the expansion of land for crop
production, the Green Scheme programme and Government‟s continued
intervention and support to increase crop production and improve business
capacity.
o
In the fishing sector, the Total Allowable Catch (TAC) for some commercial
marine species was increased for 2012. Going forward, the TAC is expected to
stabilise over the MTEF, leading to low but stable growth.
Secondary Industries
O
Secondary industries are expected to perform well against a backdrop of good
performance in the construction and other manufacturing sectors.
O
Meat processing is expected to grow over the MTEF when the new poultry farm is
expected to reach full production capacity. However, livestock processing over
2012-13 will be subdued due to restocking.
O
The other food and beverages category is expected to perform better over the
forecast period compared to the previous MTEF due to increased milk production,
expansion of the Namibia Breweries into new markets.
O
Other manufacturing is expected to be boosted by the increased production from
the Namibia Custom Smelter, increased mineral beneficiation programmes and
increased production of cement as Ohorongo cement factory reaches full capacity
and expands to new markets.
O
The electricity and water sector is expected to perform well over the medium term
due to concerted efforts aimed at import substitution and energy self-sufficiency.
o
Construction is expected to expand over the medium term due to several large
construction activities, both from the public and private sectors, such as the
expansion of the Walvis Bay port, Gecko Vision Industrial Park, the Neckertal
Dam and Kudu Gas projects coming on stream.
Tertiary Industries
O
The positive performance of the tertiary industries over the past few years is
expected to continue over the MTEF.
O
The wholesale and retail sector is expected to track overall economic development
and maintain its growth due to the favourable monetary conditions that have
helped to boost consumer demand and resulted in increased private consumption.
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Macroeconomic Framework
(ii)
o
The double dip recession in the Euro Zone is expected to hamper growth in the
tourism sector. However, continued Government and private investments will
contribute to growth over the outer years of the MTEF.
o
The West African Cable System will be the key driver for the expected good
performance of the telecommunications sector. The recently landed high speed
cable is expected to have a significant impact on the penetration of high speed
internet and telecommunications, as well as reducing the price of such.
o
Transport and storage is expected to grow due to the expansion of the Walvis Bay
port, as well as other transport and logistics activities as prioritised in NDP4.
o
The financial intermediation sector is expected to grow in line with the projected
economic growth.
Demand Side Assumptions

Annual inflation is expected to average 6.3 percent in 2012 and around 6 percent over
the 2013-2016 period.

The total population is projected to grow at 1.9 percent per annum as per the 20012031 population projections report.

The growth in private consumption is expected to continue due to low interest rates
and moderate domestic growth, thus increasing the availability of credit.

After several years of significant growth in spending, growth in Government
consumption is expected to moderate and stay constant in real terms over the MTEF.

Private investment is expected to increase, boosted by the opening/re-commissioning
of several mines and other major projects such as the Walvis Bay port expansion.

Government investment is expected to increase over 2012-13 mainly due to the
continuation of TIPEEG but is expected to moderate over 2014-16 when TIPEEG is
due to come to an end.

Exports are projected to recover from 2012 due to increased domestic economic
activity particularly in the mining and quarrying sector.

Imports are also expected to increase due to an increase in economic activity
particularly the high private and Government investments.
Produced by the MEWG 2012
The Macroeconomic Working Group (MEWG) comprises membership of the Ministry of Finance,
National Planning Commission, Bank of Namibia and the National Statistics Agency
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