Namibia’s exports have begun recovering from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports recovered to USD 6.7 billion in 2021. Namibia has a relatively diversified export profile and earnings from copper have continued increasing to USD 1.5 billion (approx. 22.1% of total exports) in 2021. Other top exports from Namibia include diamonds and fish. These exports contributed USD 2.0 billion (approx. 29.4% of total exports). Namibia’s export earnings from diamonds have continued increasing to USD 1.2 billion in 2021; and earnings from fish have continued increasing to USD 787.0 million in the same period. Namibia’s trade deficit continued widening beyond the historical medium-term average of -USD 1.2 billion for 2018 to 2020, to -USD 1.7 billion in 2021.
Total merchandise export earnings have continued increasing which relieved the pressure caused by decreased net FDI inflows (foreign capital being invested domestically). Namibia’s FDI inflows increased to USD 411.6 million in 2021. Hence, Namibia’s FDI stock has begun recovering despite being below the historical medium-term average of USD 6.8 billion for 2018 to 2020, to USD 6.3 billion in 2021. This does not bode well for Namibia as a country that is aiming to attract more foreign investment to diversify its economy away from the reliance on copper and mining exports. However, this could also signify the limited economic opportunities in the Namibian economy.
Remittances receipts have been volatile over the period. Personal remittances received have not recovered from COVID-19 and continue decreasing from an annual average of USD 61.1 million for 2018 to 2020, to USD 46.5 million in 2021. Personal remittance payments to foreign nationals have begun moderating despite being above the historical medium-term average of USD 86.1 million for 2018 to 2020, to USD 89.6 million in 2021. Namibia has had net remittance outflows (net remittance payment to foreign nationals) which increased to USD 43.1 million in 2021. This has affected the current account balance and strength of the NAD over the period.
The NAD has continued depreciating. Namibia is in a monetary union with South Africa which means the NAD is pegged at par to the ZAR. In nominal terms, the NAD depreciated by an annual average of -8.8% against the USD for 2018 to 2020. The NAD depreciated by -9.9% to an annual average of NAD 14.8 per USD in 2021. Namibia’s current account deficit continued widening beyond the historical medium-term average. In 2022, Namibia’s current account deficit narrowed despite being wider than the historical medium-term average. In particular, Namibia has benefited from higher copper prices which started depreciating by -2.4% to USD 9097.2 per MT in 2022 (2021: 50.9%; USD 9,317.4 per MT). This is also reflected in the projections for Namibia’s current account balance.
In 2023, Namibia’s current account deficit is projected to narrow below the historical medium-term average at -USD 558.0 million (approx. -4.2% of GDP). In the medium-term from 2024 to 2026, Namibia’s current account deficit is projected to narrow to an annual average of -USD 542.3 million (approx. -3.7% of GDP). This illustrates a persistent improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia and the global transition from fossil fuels in the case of copper. Copper prices are expected to remain relatively elevated in 2023. This seems unlikely to change in the medium-term due to the global commitments towards net zero by automotive producers who pledged to discontinue production of internal combustion engines by 2030 and 2050 onwards. Therefore, Namibian authorities will have to take advantage of the commodity price boom and invest in further development of the economy and diversification of the country’s exports away from the continued reliance on copper.
The issue of diversifying the Namibian economy remains an elusive obstacle for the country. Namibia still has a significant potential to grow its exports from diamonds and fish. These represent the highest growth potential towards diversifying the Namibia’s economy and export earnings. Apart from this, Namibia should also deepen its integration in the SADC region and increase its intra-regional trade. This will provide an opportunity for Namibia’s exports to compete against goods and services of comparable quality from the SADC region. Moreover, Namibia can offset the risks with its traditional export markets by increasing its dependence on the SADC region for its exports.