BoN lowers economic growth forecast for ‘22
Rising interest rates, inflation are key risks
The central bank projects a 3.2% economic growth rate in 2022, mainly driven by the mining sector.
The Bank of Namibia (BoN) lowered its economic growth forecast for 2022 from 3.4% projected in February to 3.2%, a decline of 0.2 percentage points, according the central bank’s Economic Outlook.The 3.2% real gross domestic product (GDP) growth forecast represents an improvement when compared to 2.4% recorded in 2021.
The projected improvement in 2022 is expected to be driven mainly by the mining industry, particularly diamonds and gold.
The diamond mining sector is estimated to grow by 26.7% in 2022, which is an improvement from a 2.5% growth in 2021.
In addition, the agriculture, forestry and fishing sector is projected to grow by 2.9% in 2022, representing an improvement from 2.0% in 2021.
Livestock farming is expected to recover to 5.1% in 2022, from a contraction of 2.2% in 2021, supported by increased marketing activity.
Moreover, the manufacturing sector is projected to grow by 1.5% and 2.1 percent in 2022 and 2023, respectively.
Furthermore, the hotels and restaurants sector is projected to grow by 6.5% in 2022 as the sector continues to recover from the impact of Covid -19 in 2020. The projected growth in 2022 is supported by increased international arrivals and higher room occupancies.
The transport and storage sector is projected to grow by 3.9% and 3.2% in 2022 and 2023, respectively, an improvement from a 2.0% growth in 2021.
Sectors such as uranium mining, construction, public administration and defence, as well as various sub-sectors under manufacturing that are anticipated to shrink during 2022, BoN pointed out.
Risks
Key risks to the domestic economy include rising interest rates, imported inflation and water supply interruptions that continue to affect mining production at the coast and uncertain climatic conditions, the central bank said.
The Bank of Namibia increased the repo rate by 100 basis points this year. The repo rate currently stands at 4.75% and the prime lending rate at 8.50%. The fourth monetary policy announcement for the year is expected to take place on 17 August.
According to the Namibia Statistics Agency (NSA), prices of goods and services in Namibia increased by 6% during June 2022, the highest inflation rate recorded since June 2017.
Transport, food and non-alcoholic beverages categories continue to be the main drivers of inflation. Overall transport inflation stood at 18.6%, while food and non-alcoholic beverages recorded 7%.
More specifically, operation of personal transport equipment sub category, which captures fuel, was the main driver of inflation in the transport category, recording 32%.
Lastly, oil and fats and fruits were the main driver of inflation for the food and non-alcoholic beverages category, each registering an inflation rate of 26.2% and 18.1%, [email protected]