IMF Report paints bleak picture

Frank Steffen – Windhoek

The International Monetary Fund (IMF) has downgraded the expected global economic growth for 2026 from its original 3.3% to around 3.1% amid rising geopolitical tensions and energy market disruptions, the latter largely based on the fact that around 20% of global oil supply appears to remain at risk for the foreseeable future, until the international waterway in the form of the Strait of Hormuz is fully reopened to shipping.

Three key global drivers behind the IMF’s downgrade stand out. First, escalating conflict in the Middle East is disrupting oil supply routes, pushing energy prices higher and fuelling renewed inflation risks. Second, persistent inflation may force central banks to keep interest rates elevated for longer, dampening investment, credit uptake and consumer spending. Third, heightened uncertainty is weakening investor confidence and slowing global trade, particularly affecting emerging markets and smaller open economies.

Immediate Risks for Southern Africa

For Africa, and especially Southern Africa, five factors are critical. Rising fuel costs will increase transport and production expenses in import-dependent economies, feeding directly into inflation. Secondly, weaker global demand could reduce export earnings for commodities such as minerals and agricultural products. Mining contributes roughly 8% to 12% of total SADC GDP, but this hides the large variations between countries.

The broader economic footprint rises to roughly 15% to 25% of total activity in parts of the region, with Botswana recording between 20% and 25% of GDP (diamonds dominant), Zambia at 12% to 20% (copper-cycle dependent), the DRC at 25%+ formally (much higher informally due to cobalt and copper mining), and Namibia at between 10% and 12% on account of its uranium, diamond and gold production.

A third factor impacting Africa is tighter global financial conditions, which are likely to drive up borrowing costs, limit fiscal space, and delay infrastructure investment. A fourth factor is intensifying currency volatility, making imports more expensive and complicating monetary policy. Finally, higher food and energy prices will place additional pressure on already vulnerable populations, increasing socio-economic risks.

Namibia will feel Pinch

For Namibia, the implications are direct. Higher oil prices translate into rising fuel costs, lifting inflation and operational expenses across sectors such as transport, mining and retail. While commodity exports may provide some buffer, global volatility is likely to remain a risk. Increased borrowing costs could constrain government spending, while households face declining purchasing power. In response, the Bank of Namibia is likely to maintain a cautious monetary stance, closely tracking policy moves by the South African Reserve Bank to protect the currency peg.

This could mean keeping interest rates higher for longer to contain inflation and capital outflows, even at the expense of slower domestic growth – Namibia had previously voiced an outlook of between 3.5% and 4.0% for 2025/26. The central bank is now likely to seek safeguarding financial stability and liquidity in the banking sector.

Overall, the IMF warns that growth continues, but risks are increasingly tilted to the downside. Generally, when oil prices place pressure on global growth, import-dependent economies such as Namibia tend to feel the impact more strongly than most developed economies, due to higher exposure to fuel imports and weaker macroeconomic buffers.

Renewable Energy an Option?

As regards the current interest in gas and oil production in Namibia, it needs to be remembered that production costs in Namibia are expected to be above average. On the other hand – and depending on individual countries’ circumstances – the oil price, currently settling between US$95 and US$100 per barrel, plays into the hands of the alternative energy market.

An oil price in the range of US$60 to US$80 per barrel is traditionally considered to allow a shift towards renewables on account of structural competitiveness. The range of US$80 to US$100 per barrel has previously allowed for acceleration of capital reallocation and policy response in favour of renewable energies. A price of US$100+ per barrel is regarded as a disruptive but unstable trigger for rapid diversification, which is one reason why oil-producing states have traditionally aimed to avoid sustained prices well above that level.