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Institute for Public Policy Research (IPPR)

Mining powered growth: Little economic diversification in sight

Calicious Tutalife and Veikko Shigweda1

Institute for Public Policy Research (IPPR)

IPPR Economic Outlook, February 2006

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The prospects for the mining industry, Namibia’s prime export sector, looks bright aided by the price recovery in minerals and base metals as well as the low volumes in the international Uranium market. Construction is set for a good year, and so are the telecommunications, wholesale and retail trade as well as the financial sectors. In contrast, not much is expected from the fishing and electricity and water sectors. Overall, Namibia is set for economic growth in the region of 4.0 % for 2006.

The International outlook

An unexpected increase in revenues might have raised hopes for the US government’s fiscal position. However, expenditures on the rebuilding process following the devastating hurricanes and military operations in Iraq in particular will most likely absorb a huge chunk of these funds. Rising energy costs have also come to the fore with annual inflation rate for 2005 averaging 3.4% (highest since 2000), whereas figures for the first two months of this year were higher at 4.0% and 3.6% respectively. Similarly, the fourth quarter economic growth rate came at a disappointing 1.1% (lowest in three years). Meanwhile, it is expected that the monetary tightening that has been on course for the past quarters, will come to a halt during the first half of this year. Barring another spat of natural catastrophes, rising energy prices will hold key to consumer spending. Therefore, overall growth for the US is expected to be on the downside of the 3.5% GDP forecast by OECD. Meanwhile, no change is expected on the monetary front in the Eurozone for the year as the bloc seeks to spur on the moderate activity witnessed at the end of 2005. While the economic bloc is forecast to grow by 2.1%, the challenge remains high oil prices, given current concerns about Iran’s nuclear program and instability in some parts of Nigeria.

  1. Calicious Tutalife is an Independent Researcher and was responsible for the analysis, and Veikko Shigweda was an intern with the IPPR and was mainly responsible for data compilation.

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