Allexer Namundjembo
Economists say Namibia’s downgrade by the World Bank is not a death sentence and should instead be used to reset the country’s development path.
This week, the World Bank reclassified Namibia from an upper-middle-income to a lower-middle-income country in its latest income classifications for the 2026 fiscal year, which runs from 1 July 2025 to 30 June 2026.
Namibia was the only country globally to be downgraded.
Economist Josef Sheehama said the downgrade was expected due to a decline in mining activity and the country’s overreliance on commodity exports.
“Now we move from Export Concentration Risk Commodity to Export Diversification Trade… I wrote more articles on diversification, but my warning was not taken seriously,” he said.
“It is not a death sentence. Let us work together now to reclaim our standing. We need to stop blaming and instead work together. Let us rethink our trade and industry policy strategies; structural reform is a remedy for ill economics,” Sheehama added.
The World Bank cited several factors for the downgrade, including slower economic growth, reduced inflation, a decline in the mining and quarrying sector, and major adjustments to population estimates.
In 2024, Namibia’s GDP grew by 3.7%, down from 4.4% in 2023. Inflation, measured by the GDP deflator, dropped from 6.6% to 3.3%.
The mining and quarrying sector contracted by -1.2% after growing by 19.3% the year before, largely due to weak global demand for diamonds.
The United Nations Population Division also revised Namibia’s 2023 population data upward by 13.8%. This led to a 12.9% drop in the country’s Atlas Gross National Income (GNI) per capita, a key factor in the World Bank’s income classification methodology.
Economist Mally Likukela said the development confirms that Namibia is now stuck in what economists call the middle-income trap.
“This is a worrying phenomenon because it suggests that the country suffers from a policy misdiagnosis syndrome,” he said.
“The misdiagnosis is what explains the reason why the country failed to lift itself out of the upper-middle-income category despite the implementation of the famous NDP5, HPPs.”
Likukela said the downgrade reflects how the World Bank now views Namibia, which will influence how the institution engages with the country.
“Does Namibia accept this view as the true reflection of the situation on the ground? This reclassification also has serious implications for the country’s development roadmap,” he said.
NDP6 now under pressure
He added that the upcoming National Development Plan 6 (NDP6) was developed under the assumption that Namibia remained in the upper-middle-income category.
“All strategies were informed by that category, and now with this new classification, NDP6 needs to be calibrated to reflect the new worldviewof the country.”
Likukela said that if well managed, the downgrade could open access to a wider pool of official development assistance (ODA), which could support efforts to reduce poverty and boost development.
“This again will boil down to how these ODAs are going to be used,” he said.
Namibia was first classified as an upper-middle-income country in 2009, driven by strong growth in mining, high global commodity prices, and structural reforms.
The classification held in the years that followed, with the country’s GNI per capita staying above the World Bank’s upper-middle income threshold.
However, over the past decade, economic stagnation, inequality, and weak productivity gains have exposed the fragility of that status.
Despite efforts through Vision 2030, successive NDPs, and the Harambee Prosperity Plans, broad-based transformation has remained limited.
The drop was largely expected following the release of the 2023 Census, which recorded Namibia’s population at just over 3 million, well above earlier projections of around 2.6 million.
This raised the population denominator used in the GNI per capita calculation, driving the figure down.
Between 2011 and 2023, Namibia’s population grew by an average of 3.0% per year, meaning the economy must grow faster just to keep up.
Economist Tannan Groenewald said the downgrade reflects current economic and demographic realities.
“This is not really a shock and is more so a reflection of Namibia’s recent circumstances,” he said.
“For ordinary Namibians, it simply shows that broader economic growth and job creation have not kept up with its rapid population growth. For policymakers and government, it serves as a wake-up call.”
Groenewald said the downgrade is unlikely to affect investor confidence.
“Foreign direct investment in Namibia has contributed to capital development. Investment in the key sectors of mining and extractives is unlikely to be affected by this reclassification because the income category is not really an important consideration for investors in these industries. And those exploring other sectors are likely to conduct deeper due diligence beyond headline indicators,” he said.
Meanwhile, the World Bank encouraged policymakers to consider the reclassification seriously, saying the income groupings offer key insights into economic conditions. It said understanding these factors can help countries design better policies for growth, inflation control, and integration into the global economy.
