Namibia's economy experienced stronger-than-expected growth in the second quarter, expanding by 4.8%. This outperformance, combined with an upward revision to first-quarter growth, has led to changes in the annual growth forecast. According to research firm Simonis Storm, the recovery is largely driven by base effects, services, farming, and domestic demand, rather than exports. This growth surge is not expected to be sustained throughout the rest of 2026.
Simonis Storm has maintained its 2026 growth forecast at 2.0%, which is below the predictions of other institutions. The Bank of Namibia forecasts 2.1% growth, the World Bank projects 2.7%, and the ministry of finance assumes 3.1% growth in the budget. The firm's forecast is based on the expectation that even zero growth in the second half of the year would still result in annual growth of about 2.0%, given the 4% growth in the first half.
The research firm attributes the current growth momentum to "carry over" rather than underlying momentum. Simonis Storm expects output during the second half of the year to be broadly flat year-on-year, as the Q2 surge was supported by base effects and a rebound in consumption that is not expected to repeat. Several risks to the sectors that supported growth during the first half have been identified, including rising Brent crude oil prices and increasing inflation.
Inflation in Namibia rose to 5% in August, partly due to higher pump prices. The South African Reserve Bank's decision to raise its policy rate to 7.25% on September 23 may also put pressure on the Bank of Namibia to consider a rate hike at its October Monetary Policy Committee meeting. Such a move could weigh on credit growth and household consumption, according to Simonis Storm.
The firm also highlights several specific risks to Namibia's economy, including the threat of foot and mouth disease to livestock marketing, meat processing, and beef exports. A strong El Niño could increase the risk of drought, lower crop production, and reduced hydropower generation during the 2026/27 season. Additionally, the mining sector remains a key structural concern, having contracted for six consecutive quarters.
The mining sector's contribution to GDP has decreased to 12.2%, and exports increased by only 0.3%. Simonis Storm notes that Namibia is growing without its traditional engine, reflecting domestic resilience but also a widening external gap, with the trade deficit reaching 20.8% of GDP. The firm expects economic growth to slow sharply in the second half of the year.
Despite the forecasted slowdown, Simonis Storm identifies potential sources of upside, including a recovery in uranium production and a final investment decision on the Venus oil project. Conversely, a prolonged foot and mouth disease export ban combined with drought could weigh on growth. The firm advises households, businesses, and financial markets to prepare for the expected slowdown, citing implications for consumer spending, volume growth, and investment.
Key points
- Namibia's Q2 economic growth was 4.8%, but is expected to slow down in the second half of 2026.
- Simonis Storm maintains its 2026 growth forecast at 2.0%, below predictions from other institutions.
- The research firm cites several risks to Namibia's economy, including rising inflation, interest rate hikes, and external factors such as foot and mouth disease and drought.
