Namibia Growth Cut Exposes Industrial Limits

Namibia’s decision to cut its 2025 real GDP forecast to 3.3% from 4.0% signals a post-rebound slowdown driven by manufacturing weakness, tight financing conditions, and imported cost pressures under the regional currency peg. Real growth decelerated to an estimated 3.7% in 2024 from 4.7% in 2023 as capacity utilisation slipped and credit-sensitive sectors stalled. At current prices, nominal GDP stood near NAD 310 billion (≈US$16.4 billion) in 2024. The growth mix remains narrow, with industry acting as the key transmission channel from commodities to employment and exports.

Manufacturing, about 11% of GDP and roughly 42,000 jobs, has underperformed on both volumes and margins. Output in metals, beverages, and construction materials contracted through mid-2025 as domestic orders softened and regional demand from South Africa cooled. The Common Monetary Area peg keeps the Namibia dollar tied 1:1 to the rand; when ZAR=X weakens against the dollar, imported inputs reprice higher in local terms. Energy tariffs rose by nearly 9% in 2024 and intermittent supply added downtime, lifting unit costs even where selling prices were flat. Private-sector credit expanded 5.1% year on year by August 2025, below the pace typically required for capacity upgrades. With the Bank of Namibia’s policy rate at 7.75%, funding costs remain elevated for working-capital-intensive plants.

The macro consequences are visible in fiscal arithmetic and the external account. The budget deficit is projected at 4.2% of GDP in FY 2025/26, down from 5.6% two years earlier, but consolidation has constrained capital outlays in power and logistics that would lower factory costs and raise throughput. Public debt reached 63% of GDP at end-2024, and interest payments now exceed 12% of total expenditure, tightening non-interest space. External reserves were about US$2.6 billion in Q2 2025, equal to 4.2 months of imports—adequate for liquidity management but thin for prolonged commodity or currency shocks. Headline CPI slowed to 4.8% year on year in September 2025 from a 6.2% average in 2023 as oil prices (CL=F) steadied near US$79 per barrel, but core pressures remain near 5%, reflecting pass-through from imported inputs and regulated tariffs.

Export structure amplifies volatility. Diamonds and uranium together account for close to two-thirds of export receipts; manufacturing’s share of merchandise exports remains in the low single digits. Diamond prices are down year-to-date and uranium near US$80 per pound remains supportive but cannot offset shortfalls where processing volumes lag. The terms-of-trade benefit is therefore limited and the domestic value chain shallow, curbing multiplier effects on employment and tax bases. Without faster progress on beneficiation, logistics reliability, and electricity quality, Namibia’s industrial output will continue to underperform relative to its mineral endowment.

Markets have treated the downgrade as a growth story rather than a funding stress. The 10-year Namibia government bond yield trades near 11.0%, roughly 35 basis points wider than in September 2025, reflecting a modest rise in term premia tied to execution risk on fiscal repair and state-utility finances. The peg transmits regional moves into the exchange rate; ZAR=X weakness lifted import costs and kept tradables inflation sticky despite lower fuel prices. Bank balance sheets remain liquid, but the pass-through from policy rates to lending is high, discouraging inventory rebuilds and capex across manufacturing subsectors.

Regional comparators reinforce the external drag. South Africa is projected near 1.3% growth in 2025 amid power and logistics bottlenecks; Botswana and Zambia around 3.8% and 3.5%, respectively, constrained by electricity supply and financing costs. Mozambique’s 4.4% projection, supported by LNG ramp-up, offers some services and transit opportunities, but port congestion and currency volatility limit Namibia’s substitution gains. For global investors, the relevant screen is not headline stability but whether Namibia can convert macro discipline into productivity gains at the factory gate.

The policy signal is disciplined but incomplete. Monetary alignment anchors the peg and inflation expectations; fiscal consolidation supports debt sustainability. Neither, on current settings, restores industrial competitiveness. The growth path back toward 4% requires measurable gains in utilisation, non-mineral exports, and private credit at affordable tenors, alongside ring-fenced capital budgets for grid reinforcement and trade corridors.

Forward verification is explicit: by Q4 2026, quarterly manufacturing output should expand at least 1% q/q for three consecutive quarters; private credit growth should reach or exceed 6% y/y; non-mineral export value should rise by at least 5% y/y; and the primary balance should improve by a minimum 0.5 percentage points of GDP. If these thresholds are met while CPI holds in a 4–5% band and the 10-year yield compresses by at least 75 basis points through 2027, Namibia can re-anchor growth near 4% with a lower risk premium.