Namibia’s economy is expected to grow by 2.5% this year due to a combination of low commodities prices, severe drought and an overall global slowdown.
The figure is down from a forecasted 4.3% and far short of the 5.3% achieved in 2015.
In a mid year budget review and policy statement, finance minister Calle Schlettwein said low growth in Angola and South Africa, as well as the severe drought in the agricultural sector, had led to the country cutting its budget by N$1.82bn.
Drought has cut the water supply to industries such as construction and beverages.
While the country’s construction sector saw what the minister described as a “phenomenal” rate of growth of 33.7%, due to work in the mining and public sectors, manufacturing contracted by 6.6%.
This was due to diamond processing decreasing by 47%, metals such as zinc and copper refining contracting by 13.7% and contractions in the food and beverages subsectors.
Schlettwein predicted Namibian industries would bring in less money this year. Mining is expected to shrink by 0.6% due to labour unrest and sea storms that destroyed infrastructure in 2015.
The country’s agricultural sector is forecast to shrink by 9.9% in 2016 but is expected to recover in 2017 as farmers restock their herds and access new international markets for meat exports.
State-owned enterprises not serving the social sectors are expected to see a spending freeze. However, Namibia would spend N$350m to complete the Neckartal Dam in the south of the country.
Uranium mining is expected to recover in 2016 as the Rössing uranium mine increases production.
The hotels and restaurants sector is also expected to grow as a result of the depreciation of the Namibian dollar and increased tourism due to recent liberalisation of air transport.
The report also said a new Public Procurement Act would be introduced along with “local sourcing provisions and public investment scrutiny”.
Schlettwein said: “For Namibia as a small and open economy, the impact of the adverse factors on growth for 2016 is significant, with the growth rate now estimated to slow from 5.3% in 2015, to an estimated 2.5% by 2016.
“Namibia, however, takes pride from the fact that past investment and economic development efforts have paid off. We expect growth to remain in positive territory in the coming years, thanks to anticipated increased output from recent major investment activity.”
☛ Want to stay up to date with the news? Sign up to our daily bulletin.