TAFF WRITER
ECONOMISTS say the reclassification of Namibia from an upper middle income country to a lower middle income country means Namibians are getting poorer by the day.
According to the latest classification released by the World Bank on Tuesday, Namibia is the only country whose classification moved downward this year, from the “upper-middle income” to the “lower-middle income” category.
In 2024, Namibia’s GDP grew 3.7%, a 0.7-point deceleration from 2023. Inflation (based on the GDP deflator) slowed from 6.6% in 2023 to 3.3% in 2024.
“One of the main factors behind the slower GDP growth was a sharp deceleration in mining and quarrying, for which growth went from +19.3% in 2023 to -1.2% in 2024 due to weak demand for diamonds. Population data was adjusted upwards by the United Nations Population Division (+13.8% for 2023), leading to a 12.9% decrease in the Atlas GNI per capita,” the report said.
Economist Klaus Schade told Namibia Business Review that the reclassification does not come as a surprise.
“It means that every Namibian has, on average, become poorer. This is not surprising since we experienced lower economic growth rates and a higher than expected population growth rate. Hence, the Gross National Income is divided among a larger population, resulting in lower per capita income. However, we can safely assume that the drop in income has not affected everyone equally but affected low-income earners in particular,” he said.
He said the reclassification drives Namibia further away from Vision 2030 that envisages the country to be industrialized.
Industrialization is synonymous with a high-income country.
“It signals to potential investors that the purchasing power has declined, which might impact the investment decisions of those who aim at the local market.
We might have access to concessional loans with more preferential conditions or grants, but that is certainly not the objective of our economic policies and development plans,” Schade added.
Another economist who spoke to Namibia Business Review on condition of anonymity said while the reclassification spells a bad wind for middle class and individual income growth, it now allows Namibia a chance to access grants.
“From a high level it means we are getting poorer by the day and this will mostly affect the middle class. It also means that as a country we can now access grants as compared to loans,” he said.
With the recent reclassification, Namibia may now regain eligibility for several grants and concessional resources that were previously inaccessible. Grants and concessions including the International Development Association grants from the World Bank, Gavi vaccine support and the International Monetary Fund Poverty Reduction and Growth Trust prioritize low and lower-middle income countries.
Another Economist Robin Shrbourne also shared the same sentiments with Schade.
“ Yes indeed it’s what I’ve been saying since the census. It means on average Namibians are getting poorer,” Sherbourne said.
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