Primary industry to drive growth

The Bank of Namibia (BoN) anticipates a deceleration in the gross domestic product (GDP) growth for the years 2023 and 2024, primarily attributed to weakened global demand and an expected contraction in the agriculture sector. The domestic economy is projected to witness a growth rate of 3.9% in 2023, subsequently moderating to 3.4% in 2024, according to the BoN’s Economic Outlook Update released on Friday.This forecasted growth of 3.9% reflects a notable slowdown from the 7.6% recorded in 2022, although it has been revised upwards from the 3.3% initially published in the August 2023 Economic Outlook.The slowdown in 2023 is largely attributed to diminished demand in both global and domestic economies, influenced by elevated inflation rates and soaring interest rates that adversely affect consumer spending. Additionally, the high base effects from the mining industry contribute to the 2023 deceleration, particularly in diamond mining and other mining and quarrying activities, which witnessed expansions of 45.1% and 144.2%, respectively, in 2022.Primary industriesProjections indicate a dip in the growth of primary industries in 2023, primarily attributed to the reduced expansion in diamond mining, alongside other mining and quarrying activities. The estimated growth rates for primary industries stand at 8.6% and 4.7% for 2023 and 2024, respectively, representing a moderation from the elevated base of 30% recorded in 2022.This decline in the anticipated growth for 2023 can be largely attributed to the sluggish performance in the sub-sectors of diamond mining and other mining and quarrying, both of which experienced exceptionally high growth rates in 2022, leading to substantial base effects. The August 2023 Economic Outlook initially foresaw primary industries growing at a more conservative rate of 3.2% and 3.6% in 2023 and 2024, respectively.DiamondsThe diamond mining industry is bracing for a significant decrease in growth in 2023, largely influenced by diminished production levels stemming from declining international prices. Projections indicate that the diamond mining sector is set to grow by 5.5% and 9.7% in 2023 and 2024, respectively, marking a substantial deterioration from the robust 45.1% growth recorded in 2022.This anticipated slowdown is directly linked to below-potential production, driven by unfavourable international prices for diamonds. The latest projections for 2023 remain unchanged from those published in the August 2023 Economic Outlook, underscoring the persistent challenges faced by the diamond mining sector amid the prevailing economic conditions.UraniumProjections indicate an expansion in the uranium mining sector for 2023, followed by a moderation in growth for 2024. Anticipated to surge by a significant 14.8% in 2023, the uranium mining industry is poised for a subsequent moderation with a growth rate of 3% in 2024. This positive trajectory signifies the sector's ongoing recovery from water supply interruptions that prompted mines to revise their production targets upwards.The growth projections for 2023 incorporate high operational costs and associated risks, reflecting the industry's adjustment from initially anticipating even more substantial growth. Despite these challenges, the latest growth estimate for 2023 remains consistent with the projections outlined in the August 2023 Economic Outlook, underscoring the sector's resilience and adaptability in navigating external factors.Metal oresThe metal ores sub-sector is poised for a robust recovery in 2023, maintaining its positive trajectory into 2024. Projections indicate an expansion of 24.1% in 2023, followed by a moderated growth of 7.5% in 2024. The anticipated recovery in 2023 is primarily credited to heightened production levels within the gold subsector.This surge in gold production results from the extraction of higher-grade ore across all operational mines. The August 2023 Economic Outlook initially foresaw a 12.1% expansion for the metal ores sector in 2023, underscoring the sector's resilience and surpassing expectations as it continues to rebound and contribute to overall economic growth.Mining and quarryingProjections indicate a moderation in growth for other mining and quarrying activities, encompassing oil exploration, in the years 2023 and 2024. The sub-sector is expected to witness growth rates of 35.3% and 5% in 2023 and 2024, respectively, marking a substantial reduction from the remarkable 144.2% growth recorded in 2022.The anticipated slowdown in 2023 is attributed to projections indicating a more restrained increase in exploratory efforts compared to previous years. Contrary to the initial projection of a 5.5% expansion in the August 2023 Economic Outlook, recent information suggests a more robust performance in the other mining and quarrying sector. This positive shift is credited to increased exploration activities in the oil and gas segment, indicating a more promising outlook for the industry.Secondary industriesProjections indicate a deceleration in growth for secondary industries in 2023, primarily influenced by a sluggish pace in manufacturing expansion and the persistent contraction in the construction sector. Secondary industries are expected to grow by 1.6% and 3.2% in 2023 and 2024, respectively, marking a slowdown from the 3.3% growth observed in 2022.The subdued growth anticipated for 2023 is chiefly attributed to a downturn in manufacturing growth. Additionally, the construction sector is foreseen to remain in contraction throughout 2023 and 2024, albeit at lower rates compared to the contraction experienced in 2022. Notably, the 2023 growth estimate for secondary industries has been revised downward by two percentage points from the corresponding estimate published in the August 2023 Economic Outlook. These revisions stem from lackluster year-to-date performance indicators in manufacturing and construction, falling short of earlier expectations.ManufacturingThe manufacturing sector is poised for a decline in growth in 2023 before showing signs of improvement in 2024. Projections indicate a growth rate of 1.0% in 2023, with a more optimistic outlook for 2024 at 3.5%. The subdued growth estimate for 2023 is attributed to anticipated weak performances in sub-sectors such as beverages, grain milling, chemical and related products, as well as leather and related products, all expected to contract during the year.Comparatively, the August 2023 Economic Outlook had a more positive outlook, but recent revisions downward by 2.5 percentage points for the 2023 growth estimate reflect the weak year-to-date performances in the mentioned sub-sectors. Looking ahead to 2024, the manufacturing sector is projected to rebound with a growth rate of 3.5%, supported by anticipated recoveries in grain milling, beverages, and chemical and related products.Electricity and waterThe electricity and water sector is set to maintain robust growth in 2023, followed by a slowdown in 2024. Projections suggest growth rates of 9.5% and 4.2% for 2023 and 2024, respectively, marking a deceleration from the 10.3% growth recorded in 2022.The substantial growth expected in 2023 is primarily credited to improvements in the electricity sub-sector, driven by increased local generation facilitated by elevated water levels at the Ruacana hydro-power plant following the latest rainy season.The most recent growth estimate for 2023 has been revised upwards by 4.9 percentage points from the corresponding estimate in the August 2023 Economic Outlook. This upward revision is largely based on improved year-to-date production, as indicated by the quarterly national accounts, which reported an average sectoral growth of 15.6% during the first half of 2023. However, looking ahead to 2024, the electricity and water sector is projected to experience a reduced growth rate of 4.2%, primarily due to a higher base established in 2023.ConstructionThe construction sector is projected to endure a continued contraction throughout 2023 and 2024, mirroring subdued construction activities from both government and the private sector. Anticipated contraction rates stand at 7.3% and 1.6% for 2023 and 2024, respectively, following another contraction of 16.4% in 2022. This persistent trend highlights a contraction in the sector every year since 2016 when significant construction projects in the mining sector concluded, and government initiated fiscal consolidation efforts.The latest growth estimate for 2023 underwent a downward adjustment of 9.4 percentage points compared to the corresponding rate published in the August 2023 Economic Outlook. This adjustment reflects the year-to-date performance, as evidenced by the quarterly national accounts and indicators such as government spending on construction works and the value of completed buildings.Tertiary industriesTertiary industries are poised for expansion in 2023 and are expected to maintain an upward trajectory throughout the entire forecast period. Projections indicate a growth rate of 2.9% in 2023 and 3% in 2024, compared to the 2.2% registered in 2022. Leading the growth for tertiary industries in 2023 are expected to be hotels and restaurants, transport and storage, information and communication, financial and insurance service activities, real estate activities, and public administration and defense.Despite the overall positive outlook, the 2023 growth estimate for tertiary industries underwent a slight downward revision of 0.3 percentage points when compared to the estimate in the August 2023 Economic Outlook. This revision is exclusively attributed to weaker-than-expected performance in the wholesale and retail trade sector.Wholesale and retail tradeProjections indicate a deceleration in growth for the wholesale and retail trade sector in 2023 and 2024, attributed to weakened demand. The sector is expected to grow by 4.3% and 3.8% in 2023 and 2024, respectively, reflecting a slowdown from the 6% growth observed in 2022. The persistence of high prices for consumables and elevated interest rates is anticipated to continue exerting downward pressure on consumer spending.Despite these challenges, a more favourable outlook is envisioned in the medium term as construction activities related to oil mining and green hydrogen projects gain momentum. However, the 2023 growth estimate for this sector underwent a slight downward revision of 0.3 percentage points from the growth rate published in the August 2023 Economic Outlook. This revision is rooted in the observed year-to-date performance for the sector.Hotels and restaurantsThe hotels and restaurants sector is anticipated to sustain robust growth throughout 2023, buoyed by a surge in tourist arrivals. Projections indicate growth rates of 6.5% and 5.5% for 2023 and 2024, respectively, as the sector continues its recovery from the impact of Covid-19. Despite notable growth rates in 2021 and 2022, the real value added for the hotels and restaurants sector is expected to remain approximately 20% below its pre-pandemic level.The total number of tourist arrivals at Namibian airports experienced a substantial increase of 32.6% during the first ten months of 2023, compared to the corresponding period in 2022, maintaining the strong upward trend observed over the past two years. However, tourist arrivals still lagged behind pre-pandemic levels of 2019 by 13.6%.Transport and storageProjections indicate an upward trajectory for the transport and storage sector in 2023 and 2024, with expected growth rates of 2.9% and 3.5%, respectively. This follows a modest growth of 0.9% recorded in 2022. The easing of travel restrictions in 2022, coupled with increased production and exports from the copper sector, along with higher imports of industrial and consumer goods, are poised to stimulate transportation activity in Namibia.During the first nine months of 2023, total cargo volumes witnessed a notable 3.9% annual increase. Furthermore, the sector is experiencing a rise in both the number of airlines operating in the country and the frequency of flights in 2023, further contributing to the anticipated growth improvement for the transport and storage sector.

Primary industry to drive growth

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Namibian Sun 2025-01-15

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Primary industry to drive growth

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Namibian Sun 2025-01-15

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