The Namibia Statistics Agency (NSA) states that during the month of November 2022, the country’s trade balance remained in a deficit though it improved by a notable 25.9 percent (month-on-month) and 3.2 percent (year-on-year) from N$2.0 billion recorded in October 2022 and N$1.6 billion observed in November 2021, respectively.
Simonis Storm Economist Theo Klien says Namibia’s trade balance will remain in deficit territory for most of 2023.
He attributes these risks to a lower import bill including China’s economic reopening expected in the second half of 2023 which could increase demand for commodities and increase global oil prices as well, as factory production resumes.
Furthermore, the Organization of the Petroleum Exporting Countries (OPEC) artificially lowering the global supply of oil could also be a risk to higher oil prices later in 2023 and so inflate Namibia’s oil imports.
November 2022 recorded the highest value of goods exported in 2022, rising yearly by 23.2 percent to N$8.9 billion.
Klein said that stripping out Namibia’s main commodity exports such as copper, gold, diamonds and uranium, exports only rose yearly by 14.9 percent in November 2022.
He said this once again signals the country’s over-dependence on commodities for generating foreign currency.
Between January and November, the monthly trade deficit averaged N$2.7 billion compared to N$2.5 billion for the same period in 2021 which has decreased foreign currency reserves and led to a worsening in the current account balance.
The Economist highlights that the continuous outflow of capital as Namibia records consistent trade deficits could weigh on foreign currency reserves and so the ability to maintain the currency peg.
“Especially since the main factor boosting reserves in 2021 was loans received from the IMF and African Development Bank. This might prompt the Bank of Namibia to equalise their repo rate to that in South Africa later in the year in order to maintain a healthy import cover level and avoid a deterioration in the balance of payments,” he explains.
NSA Statistician-General and Ceo, Alex Shimuafeni reveals that Namibia’s trade composition by partner showed that Botswana emerged as Namibia’s largest market for exports whereas South Africa maintained its position as the main source of imports.
Additionally, he said the composition of the export basket for the month of November 2022 mainly comprised minerals such as Precious stones (diamonds), Uranium, Non-monetary gold Copper ores and concentrates.
Similarly, fish continued to be the only non-mineral commodity within the top five products exported.
On the other hand, the import basket mainly comprised of Petroleum oils, Motor
vehicles for the transportation of goods, Miscellaneous chemical products, Alcoholic beverages and Telecommunications equipment.
Meanwhile, average monthly export values have exceeded 2021’s levels in 1Q2022, and 3Q2022 and look likely for 4Q2022 as well, whereas the average monthly value of imports has exceeded 2021 levels in all quarters in 2022.
Simonis storm notes that while double-digit growth in mining production has benefited export growth in 2022, global oil prices, a weaker Rand exchange rate and higher commodity prices inflated the import bill, leading to a trade deficit in each month of 2022.
Klein says that the data shows moderation in prices of crucial import products such as fertilisers, animal feed and petroleum oils.
Consequently, the firm expects commodity prices to decrease until mid-2023 and this will lead to vehicle, alcoholic and equipment prices to either reduce or remain relatively stable.
“Together with a stronger Rand exchange rate that we forecast for 2023, we might see the value of the import bill lower in the coming months. Flat and high single growth rates forecasted for fishing and mining in 2023 should also be supportive of export growth,” he adds.