The Central Bank of Namibia said it expected the domestic economy to fall into a deeper contraction of 1.7% during 2019, down from its initial estimate of 0.3% positive growth in April.
The central bank said the economy was expected to recover to positive growth of 0.8% and 1.2% in 2020 and 2021, respectively. The projected 1.7% contraction of 1.7% for 2019 represents a further deterioration from a mild contraction of 0.1% in 2018, according to preliminary estimates by the Namibia Statistics Agency.
The central bank said the expected deeper contraction during the year would be in line with a devastating drought now afflicting Namibia as well as anticipated contractions in major sectors such as diamond mining and wholesale and retail trade.
A likely reduced contraction in the construction sector would ease the drag on overall growth when compared to the last two years, but its impact will be offset by weaknesses in other sectors during 2019, it said.
Risks to the domestic economic outlook include the persistently low uranium price and unpredictable rainfall. Low uranium prices continue to adversely impact the prospects for uranium mining in Namibia, while erratic rainfall may continue to cripple agricultural output beyond 2019.
“Furthermore, the China-US trade tensions may negatively affect the demand for Namibian minerals and products,” the central bank said in a statement.
The bank recently cut its benchmark interest rate for the first time in two years as part of efforts to boost the economy, which has already suffered two years of negative growth, a first since independence from South Africa in 1990.