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Namibia cuts 2025 growth forecast due to manufacturing slump

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  Published in Business and Finance on Wednesday, October 22nd 2025 at 4:26 GMT by reuters.com

Namibia Cuts 2025 Economic Growth Forecast to 3.3% – A Shift Reflecting Commodity‑Driven Challenges and Policy Adjustments

In a move that signals tightening economic conditions, Namibia’s government has lowered its 2025 growth forecast to 3.3% from the earlier projection of around 4.0%. The announcement, made in late October, follows a review of the country’s economic trajectory amid fluctuating commodity prices, rising inflation, and domestic demand constraints. The decision comes after a period of moderate growth in 2024 and reflects a cautious stance by policymakers as they navigate external shocks and internal policy adjustments.

Key Drivers Behind the Revision

1. Commodity Market Volatility
   Namibia’s economy is heavily dependent on primary commodities—particularly diamonds, copper, and iron ore. Global commodity markets have seen a downturn in 2024, with diamond prices falling by approximately 12% and copper experiencing a 9% dip. The decline in export earnings has pressured the country’s foreign exchange reserves and dampened investment inflows into the mining sector, a cornerstone of Namibia’s GDP.

2. Inflationary Pressures
   Inflation has accelerated, reaching 10.3% in the first quarter of 2025, the highest in over a decade. This rise erodes household purchasing power, curtails consumer spending, and tightens credit conditions. The central bank has responded with an uptick in the policy rate from 6.5% to 7.25%, a move that, while designed to control inflation, also restrains business investment and growth.

3. Domestic Demand Constraints
   Structural weaknesses in Namibia’s domestic economy—particularly in the agriculture and manufacturing sectors—have limited job creation and suppressed domestic consumption. A survey of small‑to‑medium enterprises (SMEs) noted a 15% decline in credit uptake, further dampening demand for goods and services.

4. Fiscal Policy Adjustments
   Facing a widening fiscal deficit, the Ministry of Finance has tightened spending by reallocating resources from planned infrastructure projects to fiscal consolidation. While the fiscal stimulus has been reduced, the government maintains that the reforms will safeguard the economy in the long term.

Sector‑Specific Impacts

• Mining and Extraction
  The mining sector’s contribution to GDP slipped from 22.4% in 2023 to 20.8% in 2024. The downturn was largely due to lower output from the flagship Katima Mulilo copper mine and decreased demand for high‑grade iron ore. Mining companies have postponed expansions, and several new exploration projects have been put on hold.

• Agriculture
  The agricultural sector, which supplies about 8% of GDP, has faced a combination of drought stress and a devaluation of the Namibian dollar, increasing input costs for farmers. Crop yields declined by 5% in the 2024 harvest season, reducing export potential.

• Manufacturing
  Manufacturing output contracted by 3.5% in the first half of 2024. Low domestic demand and a shortage of skilled labor have contributed to the slowdown. The sector has struggled to diversify its product mix and penetrate new export markets.

• Services
  The services sector, which includes tourism, saw a modest decline in visitor numbers as global travel remained subdued. Tourism contributed roughly 12% of GDP but fell by 4% in 2024.

Government and Institutional Responses

• Finance Minister Patrick Mlambo emphasized that the revised forecast is “a realistic reflection of the economic environment.” He highlighted that the government is focusing on stabilizing inflation and fostering a conducive environment for investment, especially in mining and renewable energy.

• Central Bank of Namibia: The bank’s recent policy rate hike aims to moderate inflation but could slow credit growth. The central bank has pledged to monitor liquidity conditions closely and will adjust its monetary policy tools as necessary.

• International Monetary Fund (IMF): A recent IMF assessment mirrored Namibia’s more modest growth expectations, projecting a 3.2% increase for 2025. The IMF notes that a continued focus on fiscal prudence and structural reforms is vital for sustaining growth.

• Development Partners: Bilateral partners, including the African Development Bank and the World Bank, have reiterated support for Namibia’s structural reforms and have earmarked funds for infrastructure resilience projects.

Implications for Investors and Policymakers

• Investment Outlook
  Investors should reassess exposure to commodity‑heavy assets, particularly in mining. Opportunities may arise in sectors aligned with structural reforms—such as renewable energy, digital infrastructure, and agri‑tech—where the government has indicated a willingness to provide incentives.

• Policy Focus
  Policymakers are urged to balance fiscal consolidation with targeted spending that promotes job creation and economic diversification. Enhancing the business climate, improving access to finance for SMEs, and investing in human capital development could mitigate the dampening effects of external shocks.

• Regional Context
  Namibia’s revision aligns with broader Southern African trends, where several economies are experiencing slower growth due to commodity price swings and high inflation. Cross‑border trade and regional supply chains may also be affected, highlighting the need for cooperative policy measures.

Conclusion

Namibia’s decision to lower its 2025 growth forecast to 3.3% underscores a period of economic adjustment marked by commodity price volatility, inflationary pressures, and a need for fiscal prudence. While the revised outlook presents challenges, it also offers a clearer framework for policymakers to implement reforms and for investors to realign strategies. The country’s ability to navigate these conditions will hinge on its capacity to strengthen domestic demand, diversify the economy, and maintain macroeconomic stability in an increasingly volatile global environment.