Country Report Namibia May 2011

Outlook for 2011-12: Policy trends

The Namibian economy, particularly the mining sector, recovered strongly in 2010, boosted by the resumption of global demand for commodities and higher prices. It had been thought that, in consequence, the stimulus measures pursued by the government since 2009-lower interest rates and increased government spending-would be reined back during the outlook period. However, although the Bank of Namibia (BoN), the central bank, may begin to tighten monetary policy later this year, the budget for fiscal year 2011/12 (April-March) has intensified the expansionary fiscal policy in order to create jobs and reduce the estimated 51% unemployment rate. If government revenue in 2011/12 and 2012/13 fails to rise in line with projections, the government risks running an unsustainably high budget deficit, which, coupled with substantially larger domestic debt, could force spending cuts and a tighter monetary policy stance. This would have a negative impact on otherwise positive growth prospects. Provided that the accident at Japan's Fukushima nuclear plant does not affect the planned global expansion of nuclear power capacity too seriously, substantially increased uranium production from both new and existing mines will be the main generator of growth. Other policy goals include reducing both poverty and Namibia's vast income inequality.

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