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The higher growth in 2012 is in contrast to the cutting of most countries GDP growth rates in 2012 relative to 2011.

The IMF in January 2012 cut its global growth forecast for 2012 to 3.3% in its latest World Economic Outlook (WEO) from the 4.0% forecast in September 2011. It said the cut was due to the euro area crisis entering "a perilous new phase". SA's growth in 2012 has been cut to 2.5% from 3.6%, while 2013 growth was lowered to 3.4% from 4.0%.

The SA Treasury in October 2011 forecast SA growth at 3.1% in 2011 rising to 3.4% in 2012 and 4.1% in 2013, but warned that this was dependent on global growth. Most economists expect 2.8% growth in 2012, about the same as in 2011. Statistics SA will release its first estimate of 2011 growth on February 28.

The Namibian economy rebounded strongly in 2010 following the mild contraction in 2009, which was driven largely by a drop in diamond output.

The official unemployment rate is very high by international and even regional comparison, whether using the expanded measure which includes discouraged workers (51.2%) or the narrow measure, which only includes those who have looked for work in the past few weeks before the survey (37.6%). The data is taken from the 2008 Labour Force Survey. Income inequality is also high by international standards.

The fiscal stance expanded significantly in fiscal year (FY) 2011/12, with the government introducing a new program aimed at increasing long-term growth and employment. Under this program, infrastructure spending is to be increased and temporary jobs created within the public sector, with measures targeted on the sectors of agriculture, tourism, transport, and housing and sanitation.

The Bank of Namibia has maintained its policy rate at 6% since December 2010, 50 basis points above the rate of the South African Reserve Bank. Conditions in the banking sector have improved as the economy recovers, and supervision of the rapidly growing sector of non-bank financial institutions is being strengthened.

Despite a rebound in exports, driven by improved revenues from diamonds and other minerals, Namibia's external position weakened over 2010-11. This deterioration was attributable in part to strong import growth, supported by the expansionary fiscal stance, and lower Southern African Customs Union (SACU) revenues in 2010. Official foreign exchange reserves at end-2011 were US$1.9 billion, including the proceeds of Namibia's debut $US500 million Eurobond issuance in October 2011, and provide around three months of import cover.

The IMF said the economic outlook appears promising, but faces some important downside risks. There are good prospects for further investment and growth in the natural resource sector, and ongoing growth is expected in such areas as construction, manufacturing, and services.

The fragile external climate, however, poses risks for commodity demand and prices. Furthermore, the expansionary fiscal stance will likely lead to strong growth in domestic demand and imports and could put upward pressures on prices of non-tradables - hence weakening efforts to strengthen Namibia's external competitiveness and economic diversification.

The IMF said the peg to the South African rand has served the Namibian economy well, and noted the staff's assessment that the exchange rate appears to be broadly in line with fundamentals. The IMF directors agreed that closer alignment of the Bank of Namibia's policy rate to that of the South African Reserve Bank could be considered, especially if the current fiscal stimulus is unwound or if the domestic economy slows. Rebuilding reserves would help safeguard the country's external position.

Wide ranging reforms were needed to address Namibia's very high levels of unemployment and income inequality. They encouraged the authorities to tackle these problems mainly through structural reforms and stronger private investment, rather than through unsustainable increases in public spending. The IMF directors noted the scope to improve the climate for business formation and job growth by strengthening education and training, improving the functioning of labour and product markets, and easing business registration procedures.

The IMF directors welcomed the recent reclassification of Namibia as an upper middle income country as an indication of the country's successful macroeconomic performance. A few directors supported the authorities' request for donors to postpone the phasing out of concessional support given the ongoing serious development challenges.