WINDHOEK, March 31 (Xinhua) -- Namibia's financial system remains stable with strong liquidity levels and adequate capital buffers, the Bank of Namibia said on Monday.

Speaking at the launch of the central bank's 2024 annual report, Governor Johannes Gawaxab said the banking sector has maintained solid capital buffers and improved asset quality, while the non-banking sector also expanded, buoyed by strong investment returns and stable demand.

"Our banking and non-banking sectors demonstrated remarkable resilience and stability despite the prevailing economic conditions," said Gawaxab.

The bank expects the economy to rebound in 2025, with growth projected at 4 percent, accelerating to 4.4 percent in 2026, driven by a recovery in non-diamond mining and agriculture. Headline inflation is expected to average 4 percent in 2025 and rise slightly to 4.4 percent in 2026, mainly due to significant fuel deflation and lower food inflation.

Gawaxab said the domestic economy remains vulnerable to significant downside risks, most notably the potential for diminished diamond export earnings due to depressed price pressures and the increasing prevalence of laboratory-grown alternatives.

"Furthermore, the prospect of trade disruptions arising from geopolitical tensions presents a considerable challenge, while fiscal pressures resulting from declining Southern African Customs Union and diamond revenues could lead to unsustainable debt levels, potentially necessitating substantial expenditure reductions," he said.

Gawaxab noted that the southern African country's economic recovery depends on policy reforms and investment in sectors such as green hydrogen and critical minerals, highlighting the need to improve fiscal management and enhance private-sector participation to sustain long-term growth.

"While growth prospects remain positive, structural challenges such as high unemployment and limited industrialization need to be addressed to achieve inclusive economic expansion," he said. Enditem

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