Namibian economy set to grow by 5%

Windhoek - Namibia's economy is expected to grow by 5.5% in 2015 with inflation averaging 5.6%, a local stockbroking firm predicted on Tuesday.

"We expect the Namibian economy to grow by 5.5% in 2015 based on discussions with key persons, surveys, analysis of economic data and forecasts," said Simonis Storm Securities (SSS), a Namibian financial services firm, also an independent stockbroking company, in its "Namibia Economic Outlook" published Tuesday.

"A challenge facing Namibia is the rate at which imports are growing - albeit necessary for growth, the current expansion of the trade deficit could lead to a slower rate of growth than anticipated," the company stated.

Namibia's trade deficit, as a percentage of real gross domestic growth has widened from two percent in 2007 to 28 percent in 2013.

"We anticipate that it would widen further to over 30% of GDP before narrowing as real exports increase."

The main factor contributing to Namibia's import market in 2014 has been increased vehicle imports, mainly from South Africa.

These account for 14% of Namibia's imports currently.

"We anticipate that in 2014 new vehicle sales will top the 20,000 mark.

This would translate to over seven billion Namibian dollars in new vehicles sales - excluding military vehicles and other heavy purpose vehicles used in construction," SSS said.

Namibia's main trading partners in terms of imports are South Africa (70%), Germany, China and the United Kingdom.

The rising cost of electricity, water, and land in Namibia were factors likely to hamper businesses in key sectors causing them to operate at sub-optimum levels, the growth forecast said.

Interest rates are anticipated to rise during 2015, "but mainly based on global economic factors", which would lead key economies raising their interest rates.

"The movement of foreign reserves will additionally determine the extent of interest rate movements in Namibia -- we therefore factored in a 50 to 75 basis points (0.5 to 0.75%) increase for 2015," Simonis Storm Securities said on Tuesday.

The current repo rate in Namibia (the rate at which the reserve bank lends money to commercial banks) stands at six percent compared to 5.75% in South Africa.

Foreign reserves stood around 14bn Namibian dollars in November.

The Namibian dollar is pegged at par to the South African rand.