Explaining Namibia’s Growth Performance during 1970-1998: A Two-Gap Approach

Low economic growth in Namibia has been a daunting problem to policy makers since independence. Achieving specific targets defined in various development plans has been difficult and the search for the best strategy to ensure sustainable economic growth continues. Towards this goal, emphasis has been placed on stimulating growth through foreign trade. At the onset, Namibia adopted export promotion industrialization but since 1995 attempts at outward orientation still face many challenges. The objective of this study specifically was to determine the binding constraints on growth in Namibia and to discern medium to long term policies required to foster growth. Annual time series data for the 1970-1998 period were used in the analysis. This period was chosen because of sufficient number of years necessary to produce good econometric results. the study considered only savings and foreign exchange (trade) constraints. The model tested here is adapted from Weisskopf (1972), using, Cointegration and the Error Correction Method. The major findings reveal that Namibia is faced by both the savings and foreign exchange constraints. This implies that Namibia requires foreign capital inflow to fill the investment- savings gap and imports-exports gap. Policies to strengthen investment in Namibia are recommended. Policies that can mobilize saving and realise foreign exchange are emphasized.