BRITAIN voted to leave the EU and although the results surprised many, it has set off a chain of events that have increased volatility in an increasingly volatile global economy. We expect global growth to lower by 0.2 to 0.5 percent through downward revisions to both the UK and EU economies. For Namibia, the Brexit implications will in all likelihood trickle down to the export sector and most notably the beef and grape exports marketed through the UK. Beef exports account for 2.1% of our total exports and the lower global growth will reduce EU demand for our beef and deliver softer prices. The same applies for grapes which account for an estimated 1.8%. Although the shock to global GDP is limited to the next two years, the implications for Namibia are protracted over the next seven years, eroding 0.6% growth off the country’s export bill over the next seven years.
Although delayed, the resulting slower global growth additionally would erode investment growth in the domestic economy.
Therefore investments are expected to revise downwards by 0.9% from 2018 to 2020 in the form of lower FDI growth, although not significantly considering that investments should generally manage more robust growth levels. Inbound tourist arrivals from the EU source market would also fall due to negative wealth effects. We would expect a noticeable reduction in tourist numbers from next year, as 37% of our tourists are of European and UK origins. Although the negative implications are noticeable at sector level, they are not even noticeable on overall GDP performance at one decimal point at the macro level.
Despite the plethora of global headwinds, we remain cautiously optimistic about the medium-term outlook for Namibia. The economy should eventually benefit from infrastructure upgrades and greater commodity production capacity.
An improvement in transport networks, coupled with increased electricity, port and water storage capacity ought to position the country as an efficient and reliable regional logistics hub in the long haul and thereby create a conducive economic foundation for the highly acclaimed Harambee Prosperity Plan.
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