Economy is estimated to grow by 3.5% this year – Shiimi
The economy is estimated to grow by 3.5% in 2023 before slowing to 2.9% in 2024, compared with previous estimates of 3.2% and 2.2%, respectively, Finance Minister Iipumbu Shiimi said this week in his mid-term budget review.
“The domestic economy remains resilient despite vulnerabilities in the global economy. Despite high global inflation and the resultant tight financial conditions, the Namibian economy is, in several ways, outperforming some of its peers. Nevertheless, as a small and open economy, the Namibian economy remains highly vulnerable to external risks,” Shiimi said while tabling the mid-term budget.
According to Shiimi, risks to the domestic economic outlook remain, although somewhat reduced. He added that volatile global commodity prices pose a threat to both domestic output and taxes.
“The depreciating real income for households, exacerbated by high inflation and interest rates, is a risk to consumption as real incomes remain muted in the short to medium term. Furthermore, drought and water supply constraints pose a threat to domestic crop and electricity production,” he said.
He said the strong outlook offers the opportunity for Namibia to adjust to medium-term risks and implement targeted policy packages to boost resilience and lift tomorrow’s growth prospects.
“In this regard, the immediate focus of fiscal policy in the near term is to shield the economy and the well-being of our people, particularly the most vulnerable segments of society, from the impact of the ongoing drought,” he said.
Shiimi warned that the public debt servicing bill has increased beyond the levels anticipated in the main budget, leading to a revision of interest payments upwards by N$1.7 billion to N$11.8 billion in the financial year 2023/24, equivalent to 15% of projected revenues for the year.
The total debt stock stood at N$142.7 billion, equivalent to 67.9% of GDP. In nominal terms, debt grew by 13.5%, outpacing the growth in nominal GDP, which is recorded at 11.1% over the same period.
Shiimi said that for Namibia to achieve long-term debt sustainability, the fiscal policy stance must be such that the nominal growth in debt is lower than the growth in nominal GDP. Thus, containing the pace of growth in public debt should remain a key priority for fiscal policy in the upcoming Medium Term Expenditure Framework.
