THE Bank of Namibia (BoN) is reporting that Namibia is in fact not in a middle-income trap as it is below the threshold set by the World Bank.
This is despite the fact that it would take the country a total 54 years to catch up to the US economy and be classified as a High Income Country – an average growth rate for most Middle Income countries.
This was revealed at the BONs 20th Annual Symposium, themed, “Escaping the Middle – Income Trap: A Perspective from Namibia”.
The event was attended by Namibia’s Prime Minister, Saara Kuugongelwa-Amadhila, the Governor of the Bank of Namibia Iipumbu Shiimi, economic researchers from the World Bank, the Asian Development Bank and other high level delegates.
Presenting the study at the event, Florette Nakusera, Director at BoN’s Research & Financial Stability department, stated that the term ‘middle income trap’ captures a situation where a middle-income country can no longer compete internationally in standardised, labour intensive commodities.
“This is because wages are relatively too high, but it can also not compete in higher value-added activities on a broad enough scale because productivity is relatively too low. The result is slow growth and less potential for rising living standards for more people. The transition to high-income levels then seemingly becomes unattainable,” Nakusera summarised.
She added that Namibia‘s recent pace of economic growth, or rather, lack thereof, remains slow relative to the level required to meet vision2030.
“Namibia’s recent growth pattern suggests that it could be in danger of becoming part of the slow transition economies. She added that for Namibia to transition into a High Income Country within the historical median of 15 years, a growth rate of 3.27% is required. Therefore, Namibia should implement policies to accelerate growth to avoid the Middle Income Trap,” Nakusera said.
From the available data provided by the World Bank (1989 – 2018), Namibia spent around 19 years as a LMIR country before moving to the upper-middle-income (UMIR) range in 2008.
Between 2008 and 2018, Namibia’s real GDP per capita grew by 3.2% per annum, which is more or less in line with the definition which calls for 3.27% growth rate for upper-middle-income (UMI) to transverse to higher-income (HI) countries.
Namibia has been in the middle income category for a period of 11 years, which is still below the 15 years which is the median of the economies that transition from the upper-middle income category to higher income.
Giving a presentation on how Namibia could avoid the Middle Income Trap, Advisor for the Economic Research and Regional Cooperation department from the Asian Development Bank (ADB), Dr. Jesus Fillipe, stated that the problem is the low pace of structural transformation which gets workers from the least productive sectors to higher producing sectors within the economy.
He added that to bring about positive change to the economy, Namibia needs to cultivate a cultures of entrepreneurship, collaboration between the modern private sector and the public sector, as well as explore the possibility of exporting more complex products.
Fillipe further advised that reforming everything at once tends to create a bottleneck.
“Do not reform everything at once. Out of 20 objectives, focus on 2 or 3 objectives, which can accelerate growth,” the economist stated.