Context. Namibia has experienced a period of exceptional growth and economic stability, but faces significant policy challenges and structural issues. Strong growth was partly attributable to temporary factors that have come to an end. Public debt is rising and reserve coverage is below adequate levels. Financial institutions’ interconnections and exposures, and elevated private sector indebtedness pose macro-financial risks. Structural impediments have contributed to keep unemployment and income inequality unacceptably high.
Outlook and challenges. With temporary expansionary factors ending, growth contracted in 2017 and is expected to resume in 2018. Downside risks weigh on the outlook, and emanate from possible fiscal slippages that could undermine policy credibility; lower demand for key exports; and declines in SACU revenue. The impact of shocks could be amplified by macro-financial linkages. Namibia’s key policy challenges are to manage the ongoing adjustment process and bring public debt on a sustainable path, address macro-financial risks and financial sector vulnerabilities, and generate sufficient jobs to manage upcoming demographic changes and reduce income inequality.
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