Chamwe Kaira
The Development Bank of Namibia (DBN) has flagged several downside risks to the Namibian economy despite a positive growth outlook, according to its Integrated Annual Report for the 2024/25 financial year.
The bank said one of the main risks is reduced diamond export earnings, driven by declining global diamond prices and growing competition from lab-grown alternatives.
It also warned that possible trade disruptions linked to rising protectionist policies, together with inflationary pressures caused by ongoing global conflicts, continue to increase economic uncertainty.
Fiscal pressures remain a concern, with declining revenues from the Southern African Customs Union (SACU) and lower diamond receipts posing risks to debt sustainability.
The bank said these pressures could force significant cuts in government spending. Increased rainfall also presents risks through possible infrastructure damage and flooding, which could heighten economic vulnerability.
DBN said global market conditions, including the impact of tariffs imposed by the United States, could slow global growth, weaken Namibia’s exports and strain government revenues. Despite these risks, the economy is expected to grow by 3.8% in 2025.
The report showed that Namibia’s real gross domestic product continued to expand in 2024, though at a slower pace than in 2023.
Economic growth eased to 3.7% in 2024 from 4.4% the previous year, mainly due to weaker performance in the primary sector. This contraction was driven by lower diamond production and reduced crop output.
Performance in the secondary and tertiary sectors improved. Growth in the secondary sector was supported by increased manufacturing and construction activity.
The tertiary sector benefited from stronger wholesale and retail trade, supported by rising household incomes, easing inflation, increased spending linked to mineral exploration, tax refunds following adjustments to tax brackets, and moderately lower interest rates.
Other sectors that supported tertiary sector growth included transport, hotels and restaurants, finance, health, as well as public administration and defence, all of which recorded solid growth during the year.
Inflation pressures eased in 2024, offering some relief to consumers. Average inflation fell to 4.2% in 2024 from 5.9% in 2023, largely due to slower increases in food and transport prices.
Transport inflation moderated as personal transport operating costs declined, supported by stable or lower fuel prices for much of the year. Food and housing inflation rose slightly, partly offsetting the overall decline.
According to the Bank of Namibia’s April 2025 Inflation Outlook, inflation is expected to average 4.2% in 2025 and rise to 4.5% in 2026.
On monetary policy, the central bank kept the repo rate at 7.75% for most of 2024 before cutting it to 7.25% in October and 7.00% in December. A further 25-basis-point cut in February 2025 lowered the repo rate to 6.75%.
The easing followed trends in advanced economies and aimed to support domestic activity while maintaining financial stability.
As a result, the prime lending rate declined from 11.50% in April 2024 to 10.50% by the end of March 2025, easing pressure on borrowers.
Caption
The Development Bank of Namibia (DBN) says reduced diamond export earnings, driven by falling global prices and competition from lab-grown alternatives, remain a key risk to the economy.
- Photo: Contributed
