Thorsten Schier
23 June 2009
NAMIBIA is one of the sub-Saharan countries most severely affected by the fallout from the global financial crisis, the World Bank says.
While Namibia's direct exposure to the crisis is minimal, the ensuing drop in income for developed countries will result in less demand for Namibian exports and services.
This emerges from a recent reported by the World Bank entitled 'Global Development Finance 2009: Charting a Global Recovery'.
According to the bank's report, Namibia's economy is set to contract by 1,7 per cent in 2009.
This means that in sub-Saharan Africa, only Zimbabwe's economy will grow less, with negative growth of 4,6 per cent this year.
Namibia is one of the countries that rely on two industries that have slowed the most during the financial crisis: mineral exports and the tourism sector.
The bank says a prolonged recession could have even more dire consequences for Namibia, as it "slow the recovery in demand, prevent a recovery in commodity prices, and further depress tourism revenues, aid, and private capital flows".
One bright spot for Namibia in the crisis is the fact that it has relatively low levels of government debt and is not as reliant as other countries in the region on foreign aid.
Interest rates have shot up recently due to economic uncertainty, making it difficult for heavily indebted governments to service their debts.
Also, private capital flows and foreign aid to the region have dropped sharply in 2008.
Private investment dropped to $707 billion, down from over a trillion in 2007, and the bank predicts it will fall further to levels last seen in 2003.
Foreign aid and remittances, money workers send home which they earned overseas, is also set to drop by 4,4 per cent.
This affects especially countries that rely on these flows to make up their foreign currency reserves.
Growth overall in the region is set to decline to one percent in 2008, down from 4,8 per cent in 2008.
As the sub-Saharan region is heavily dependent on demand from developed nations, which it has no control over, the bank sees the only way to sustain adequate growth levels in increased government spending.
Namibia has followed this advice, tabling an expansionary budget this year.
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