Article

The Namibian Economy

Liquidity and funding

Introduction

Historically, Namibia has been an economy characterised by an abundance of liquidity. This situation turned around abruptly in the latter half of 2016 and into 2017. At the same time the Namibian economy slowed dramatically, going from growth of between 5.1% and 6.4% for the six years from 2010 to 2015, to just 1.1% in 2016, with four of the past five quarters (to Q2 2017) showing contractions. 

There are a number of reasons for the abrupt growth slowdown in the local economy, ranging from adverse weather conditions and commodity prices, to weakening domestic demand and investment. 

However, liquidity is one of the major factors driving the recent economic slowdown. While initially a symptom, the lack of liquidity (i.e. funds available to the economy), particularly in government debt auctions and the commercial banks, contributed to the slowdown through 2016 and into 2017, and remains a drag on the local economy and a risk to the Namibian economic recovery. 

The reasons for this slowdown, particularly focusing on the banking sector liquidity, are further discussed in this report.

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