Country Brief

Last updated September 2009

Key Facts

2008* Population,total (millions) 2.0 Population growth (annual %) 1.0 Life expectancy at birth, total (years) 47 GDP (current US$) (million) 8 133 GDP growth(annual %) 2.9 GNI percapita, Atlas method (current US$) 4 210 Inflation, consumer prices (annual %) 10.3 Foreign direct investment, net inflows (% of GDP) 2.3 Unemployment,total (% of total labor force) 37 Time required to start a business (days) 66 Internet users (per 1,000 people) (2004 figure) 49 Source:World Development Indicators. *Mostrecent data available 2000-2008

Namibia is a middle-income country whose considerable successes rest on a strong multiparty parliamentary democracy that delivers sound economic management, good governance, basic civic freedoms, and respect for human rights. At independence in 1990, Namibia inherited a well-functioning physical infrastructure and a market economy, coupled with rich mineral resources and a relatively strong public administration. However, the social and economic imbalances of the apartheid system left Namibia with a highly dualistic society. The structure of the economy has made job creation and poverty reduction difficult, and inequality unacceptably high, key challenges that are at the top of the government’s development agenda.

Namibia has made great progress in addressing the structural problems: access to basic education has become more equitable and primary health care coverage is more widespread. Namibia is among the top 10 countries worldwide in terms of share of gross domestic product (GDP) spent on education, and second to South Africa on the African continent in per capita expenditures on health. The government has improved access to safe water and sanitation; it has laid the foundation for gender parity, and launched programs to protect the country’s environment and natural resources. Namibia is also one of the few countries in sub-Saharan Africa that maintain a social safety net for the elderly, disabled, orphans and vulnerable children, and war veterans. Furthermore, Namibia has a Social Security Act that provides for maternity leave, sick leave, and medical benefits.

Despite these advances, Namibia’s human development indicator ranking is 129 out of 179 countries surveyed in the 2008 Human Development Report. Although Namibia is on track to meet some of the Millennium Development Goals, it will be challenging to meet the HIV/AIDS goal.

Economy

Economic performance

Namibia is a small open economy closely linked to South Africa. With a per capita income of about US$4,200 in 2008, it is classified as a lower middle-income country. Namibia has experienced steady growth, moderate inflation, strong external surpluses and low indebtedness over the past several years as a result of generally prudent fiscal policies, a stable political environment, a fairly developed infrastructure, and a strong legal and regulatory environment. The global economic crisis has thus far impacted Namibia principally through lower demand for its commodity exports, mainly diamonds, and slowdown of the South African economy.

Economic growth since independence has averaged 4.5% per annum, sufficient to increase per capita income in most years. Real GDP grew by 7.2% in 2006, 4.1% in 2007, and by 2.9% in 2008. Against the backdrop of the global economic crisis, GDP growth projection was lowered to 1 % in 2009 despite a large fiscal expansion proposed in the 2009/10 budget. The projection was downwardly revised to 0.5% because of the devastating floods earlier in the year.

Overall, the economy is dominated by the services sector, which accounts for around 50% of overall output and for much of the growth.

Namibia’s strong record of macroeconomic stability is based in part on a credible peg to the South African Rand through its membership in the Common Monetary Area. The peg has linked Namibia to South Africa’s inflation targeting framework. As a result, inflation trends in Namibia closely follow that of South Africa. Mirroring the South African Rand, the Namibian dollar depreciated sharply in 2008, but has since recovered most of its value against the US dollar. After peaking at 11.9 % in July 2008 the annual consumer inflation moderated to 7.5 % in July 2009. Namibia’s current account surplus remained strong, averaging 6.5% of GDP from 2002-2005 and reaching an estimated 15.1% of GDP in 2006 and 8.1% in 2007.  In 2008 the current account surplus as a percent of GDP is estimated to have fallen by 2 %, reflecting declining terms of trade and substantial imports for mineral exploration and public infrastructure projects. Exports account for almost 60% of GDP, with diamonds and other minerals accounting for close to 55% of total exports. South Africa is Namibia’s main trading partner.

Namibia ’s public debt management has been prudent. In 2006/07 public debt stood at 28% of GDP and dropped to almost 19% in 2007/2008, below the government’s target of 25%. During the 2008/2009 fiscal year public debt is estimated to have risen to 22.0% of GDP, with a fiscal deficit of 2.6% of GDP following two consecutive years of surplus.

Challenges ahead and government priorities

Namibia ’s track record  with respect to economic growth and macroeconomic stabilization  has been noteworthy over the past two decades.  Future prospects remain bright, although some daunting development challenges remain. In particular, while poverty has declined since independence, it remains high on account of very unequal distribution of income and assets (with a Gini coefficient of 0.6, inequality in Namibia is among the highest in the world) and widespread unemployment.

There has been a reported decrease in HIV prevalence to 17.8% (down from 22% in 2002) according to a 2008 survey, and an estimated 15.4% adult HIV prevalence.  However, HIV remains a serious threat to development. Adding to the HIV/AIDS challenge, Namibia has one of the highest tuberculosis prevalence rates in the world (765 per 100,000 in 2006, with several regions reporting rates of over 1000 per 100,000).

A central policy challenge in Namibia is to achieve higher rates of growth, create jobs, alleviate poverty, reduce inequality and raise living standards.

World Bank assistance

Program to date

Namibia became a member of the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) in 1990. In the early years, a number of analytical and advisory activities were undertaken, some jointly with the government focusing on the development challenges it faced.

Namibia has benefited from Global Environment Facility (GEF) grants. There are two active GEF projects at present: the Integrated Community-based Ecosystem Management Project and the Namibian Coast Conservation and Management Project.

The World Bank has provided assistance to combat HIV/AIDS through an Institutional Development Fund (IDF) grant to foster a partnership among key players for implementing the national medium-term plan on HIV/AIDS (2004-2009). Namibia also benefits from technical assistance from the Global AIDS Monitoring and Evaluation Team, and from capacity building initiatives provided to middle income countries in southern Africa.

In response to the government’s request for support with the floods in the northern part of the country the World Bank mobilized a team in May-June 2009 to undertake a Post-Disaster Needs Assessment jointly with the United Nations Development Program (UNDP) and other development partners. The joint assessment report was submitted to the government in August 25, 2009. The government requested a Post Disaster Needs Assessment during the Spring Meetings in Washington DC. The assessment found damages to physical assets (mainly private) to be N$1.1 billion (USD 130 million). Losses in production flows were estimated to be N$0.6 billion (US$70 million), and were also mainly incurred in the private sector.  Long term reconstruction and transformation costs were estimated at US$ 460 million, about 5% of Namibia’s  2009 GDP. The Bank can assist the government in its efforts to increase the country’s resilience to natural disasters in a variety of ways, including analytical work, technical assistance, and lending.

In May 2007, the first ever Interim Strategy Note (ISN) for the period 2007-2009 was presented to the World Bank’s Board of Executive Directors. The ISN envisages a flexible business model in step with the government’s budget and decision-making process that emphasizes analytical and technical assistance.

The first IBRD loan for Namibia – a Development Policy Loan (DPL, US$7.5 million) – was approved in May 2007.  A second DPL has been prepared, was approved in November 2008, and is awaiting effectiveness. The DPLs support development of specific policies and instruments to implement sector reforms and build institutional capacity required for effective implementation of reforms.

The International Finance Corporation (IFC) has been involved in small investments: a fisheries project (Pescanova), and an equity investment in the country’s first indigenous life insurance company (Namibia Life). An IFC loan supported the construction of a 110-room Best Western hotel in northern Namibia. On the technical assistance front, IFC worked with the Namibian Agronomic Board to raise trust funds for a feasibility study of a cotton ginning industry. In August 2008, IFC extended a $10 million loan for the construction of a Protea Hotel in Central Windhoek by United Africa Group, marking the second IFC investment with this client.

The Multilateral Investment Guarantee Agency (MIGA) has not been active in Namibia.

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