Namibia slid into recession after its economy contracted in the final two quarters of 2017, due to declines in the construction and trade sectors, stated Namibia’s Statistics Agency on Thursday.
According to the statistics agency, the economy shrank by 1.9 percent in the third quarter after a revised contraction of 0.7 percent in the second quarter, meanwhile, the country’s Gross Domestic Product (GDP) fell 0.8 percent in 2017 compared to the 0.7 percent growth witnessed in 2016.
In the fourth quarter of 2017, Namibia’s GDP contracted by 1 percent year-on-year after a 1 percent drop in the third quarter.
Namibia is a higher middle-income country with an estimated annual GDP per capita of US$5,828 but has extreme inequalities in income distribution as it leads the list of countries by income inequality.
Last year, rating agency Fitch, downgraded Namibia’s credit rating to “junk” status as it cited ‘weaker-than-forecast fiscal outcomes’. However, the International Monetary Funds (IMF) projects that growth would resume in 2018 for the Southern African country and would accelerate to about 4 percent as mines would produce more and manufacturing and retail activities would recover in the country.
“Growth is projected to resume in 2018, as mining production ramps up, construction activity stabilizes and manufacturing recovers, before converging to a long-term rate of about 3.5 percent, below the average of recent years,” the IMF stated. Though robust growth masks rising macroeconomic vulnerabilities and deteriorates productivity performance, IMF warns.
Namibia is heavily dependent on the extraction and processing of minerals for export. Taxes and royalties from mining account for 25 percent of the country’s revenue and the bulk of these revenues is created by diamond mining, which makes up 7.2 percent of the 9.5 percent GDP.