Namibia’s growth outlook cut as economy weakens … Repo rate remains unchanged at 6. 75%
Pricilla MukokobiEster HakaalaNamibia’s economy is expected to grow by just 2. 1% this year after the Bank of Namibia lowered its growth forecast, citing weak performance in mining, manufacturing, electricity. . .
Pricilla MukokobiEster HakaalaNamibia’s economy is expected to grow by just 2. 1% this year after the Bank of Namibia lowered its growth forecast, citing weak performance in mining, manufacturing, electricity generation and transport during the first half of 2026. The central bank reduced its growth outlook by 0. 5 percentage points from its previous forecast after economic activity remained subdued during the first half of the year. The economy grew by 1. 7% in 2025, but the expected rebound has been slower than anticipated. Bank of Namibia governor Ebson Uanguta said the latest figures reflect the difficult conditions facing the domestic economy. “The economy grew by 1. 7% in 2025, but the expected recovery has been weaker than initially forecast,” Uanguta said. He said mining, manufacturing, electricity generation and transport recorded weaker activity during the first six months of the year, offsetting improvements in agriculture and the wholesale and retail trade sector. The weaker outlook comes as Namibia continues to face pressure from a challenging global environment, softer demand for some of its key exports and rising import costs. Inflation also moved higher during the second quarter of the year. Annual inflation increased to 4. 4% in June, up from 4. 1% in May, mainly driven by higher transport costs. Although inflation accelerated in recent months, Uanguta said price growth during the first half of the year remained below last year’s level. “Inflation averaged 3. 2% during the first half of the year, lower than the 3. 6% recorded during the same period in 2025, mainly because food price increases were lower,” he said. The central bank expects inflation to average 4. 0% in 2026, compared to 3. 5% in 2025, before easing slightly to 3. 9% in 2027. Higher transport costs remain a concern because they affect businesses across the economy and can eventually push up the prices of goods and services. Another risk comes from developments in international oil markets. Brent crude oil prices climbed to almost US$100 per barrel during renewed tensions in the Middle East before easing to around US$88 per barrel. Sustained increases in oil prices could place additional pressure on fuel costs, transport expenses and overall inflation. Namibia’s external position has also come under pressure. The country’s trade deficit widened to N$19. 3 billion during the first six months of 2026, compared to N$12. 8 billion during the same period last year. According to Uanguta, the wider deficit was mainly driven by higher import payments, particularly for mineral fuels. “High import prices could continue putting pressure on Namibia’s external position,” he said. The figures show that the value of goods imported into the country continued to outpace export earnings, increasing pressure on the country’s balance of trade. The mining industry, one of Namibia’s biggest contributors to exports and government revenue, also continues to face mixed fortunes. Rough diamond prices remained under pressure because of weak global demand and increasing competition from lab-grown diamonds, while the gold sector also experienced weaker conditions. However, other commodities provided some support. Gold prices strengthened as investors sought safe-haven assets amid global uncertainty, while uranium prices remained firm because of growing demand for nuclear energy. Copper and zinc prices also stayed elevated as global demand continued to outstrip supply. The Bank of Namibia also noted signs of caution in the private sector. Private Sector Credit Extension (PSCE) grew by 4. 5% in June, slightly lower than at the previous Monetary Policy Committee meeting. The moderation was mainly driven by slower borrowing by businesses, while household credit continued to grow. Lower business borrowing often reflects slower investment as companies delay expansion plans and new projects during periods of economic uncertainty. Despite the weaker economic outlook, the country’s external buffers remain strong. International reserves increased to N$57. 1 billion at the end of July, up from N$55. 4 billion at the end of May. The reserves are sufficient to cover about 3. 5 months of imports, which the central bank said remains adequate to support the Namibia dollar’s peg to the South African rand and meet the country’s international financial obligations. The Monetary Policy Committee also decided to keep the repo rate unchanged at 6. 75%, leaving the commercial banks’ prime lending rate at 10. 25%. Uanguta said the decision balanced the need to support economic activity while safeguarding international reserves and maintaining the exchange rate arrangement with South Africa. “The committee considered the need to safeguard the currency peg, preserve adequate international reserves and support the domestic economy in the current environment,” he said. The central bank said the country’s growth prospects remain exposed to several downside risks. These include weaker global economic growth, continued uncertainty in international commodity markets, high import costs, the outbreak of Foot and Mouth Disease in neighbouring countries and the possibility of El Niño conditions affecting agricultural production. [email protected]