An International Monetary Fund (IMF) team, led by Geremia Palomba, visited Windhoek during November 2–9, 2018 to
discuss recent developments, the economic outlook and related policies, in
the context of its regular Article IV discussions.
At the conclusion of the visit, Mr. Palomba made the following statement:
“After years of robust growth, the economy has entered a recession phase.
GDP declined in 2017, as the temporary stimulus from large constructions in
the mining sector dissipated, and the government continued consolidating to
stabilize public debt dynamics.
“IMF staff anticipates that the economy will recover gradually. Real GDP is
projected to contract in 2018, albeit at a lower rate, and turn positive in
2019, supported by strong mining production and a rebound in construction
activities. Growth is expected to strengthen over time, and converge to a
long-term rate of about 3 percent, below the average of recent years, held
back by low productivity growth and stagnant competitiveness. Downside
risks to this outlook include lower than expected revenue from the Southern
Africa Customs Union (SACU), slower growth recovery, and fiscal slippages
that could undermine policy credibility and debt sustainability.
“Namibia’s key challenges are to continue implementing fiscal consolidation
plans to contain public debt dynamics and preserve macroeconomic stability,
and pursing reforms to raise productivity, long-term growth, and job
creation.
“The recent commitment to deliver this year fiscal deficit target and
further deficit reductions over the next years is a welcome step. The
adjustment is warranted due to rising public debt and to preserve
macroeconomic stability. In preparation of next year budget, the strategic
policy decisions and specific measures to deliver the planned adjustment
should be clearly identified. Policies should address the sources of recent
deterioration, particularly public wage costs and transfers to public
entities. Moreover, they should combine expenditure and revenue measures to
contain the short-term impact on growth, while safeguarding critical social
and capital spending.
“There is significant room to undertake supply-side reforms to strengthen
productivity and potential growth, and support job creation, in parallel
with fiscal adjustment policies, As the government adjusts, special
emphasis should be placed on strengthening the market operations of key
public enterprises to improve the efficiency of the economy, and on
establishing a well-structured wage policy for the public sector to better
align wage dynamics with productivity growth. Over time. it is important to
remove obstacles to exports, reduce market barriers, and streamline
business regulations that contribute to high business costs, while
addressing the shortage of skilled workers.
“The financial sector remains sound, although economic slowdown has started
affecting it. . The authorities are taking steps to curb possible risks and
advance key reforms, such as strengthening bank’s asset classification, and
upgrading the non-bank regulatory and supervisory frameworks. These actions
should help address macro-financial and structural vulnerabilities,
including banking and non-banking sector weaknesses.
“Discussions held with the authorities have set the stage for the upcoming
2019 Article IV consultation with Namibia planned to take place in early
2019.
“The mission thanks the authorities for their hospitality and productive
discussions.”
