By Helena Mboti, Standard Bank Namibia’s Group Economist.
Overview
The Namibia Statistics Agency reported that economic activity accelerated to 4.8% y/y in 2Q26, from a revised 3.1% (previously 2.0%) in 1Q26 and 1.7% in 2Q25, better than broadly anticipated for the first half of the year.
The tertiary sector remains the main anchor of growth, expanding by 6.1% y/y from 3.8% in 2Q25, alongside a strong recovery in agriculture and manufacturing. Wholesale and retail trade (+9.0%), agriculture (+17.8%), and a notable acceleration in health (+17.6% from +2.7% in 2Q25) were the three largest contributors to growth, adding +0.9ppt, +0.8 ppt, and +0.7ppt, respectively.
Importantly, Gross Fixed Capital Formation (GFCF) accelerated to 14.4% y/y from -4.4% in 2Q25 and 3.4% in 1Q26, driven primarily by machinery and transport equipment. This is important in the Namibian context, where stronger capital formation and project activity flow through to procurement and household income, supporting private spending which boosts tertiary sector activity. This transmission is increasingly visible in private consumption (+11.6%), and a resilient tertiary sector, suggesting that the investment cycle is generating some broader effects than initially reported in June 2026.
The key structural drags remain mining (-3.1%), construction (-15.5%) and electricity and water (-2.6%), subtracting 0.3ppt, 0.2ppt and 0.1ppt, respectively. This points to an uneven growth profile, with weaker capital spending on exploration and construction offsetting stronger expenditure increasingly supporting consumption and services.
The 4.8% y/y headline partly reflects favourable base effects, with real GDP increasing only marginally from N$41.38bn in 1Q26 to N$41.52bn in 2Q26 (+0.3% q/q). However, the improvement is not purely statistical, as stronger investment is feeding through into consumption and tertiary activity. Still, persistent income and employment constraints, alongside rising household costs, suggest that some of the consumption growth may reflect investor and project-related spending rather than a broad-based improvement in household spending power.
Sectoral Performance
The primary sector improved materially in 1Q26 compared to 2Q25, driven by agriculture and forestry (+17.8% y/y from -2.7%), supported by favourable rainfall in the previous season, stronger crop production (+28.5%) and recovering livestock activity (+7.2%).
In contrast, mining remained the largest individual drag on headline GDP, contracting by 3.1% y/y during the period under review, broadly unchanged from the 3.0% contraction recorded in 2Q25. Weakness was concentrated in uranium (-12.0%) and metal ores (-20.1%), while diamond mining remained marginally negative (-0.2%).
This confirms our 1Q26 expectation that commodity production would remain under pressure, particularly as weakening global growth reduces demand. However, the strength of the agricultural recovery has provided a considerably larger offset than anticipated.
The secondary sector improved marginally, expanding by 0.8% y/y in 2Q26 compared with a contraction of 1.5% in 2Q25. Manufacturing provided an important upside surprise, reversing from -7.9% in 2Q25 to 3.9% in 2Q26. The improvement was led by diamond cutting and polishing (+76.5%), alongside gains in leather products, dairy products and meat processing.
However, manufacturing gains were partly offset by a sharp deterioration in construction (-15.5%), reversing from +29.9% in 2Q25 and +1.6% in 1Q26. The contraction was principally attributable to a 55.1% fall in real government construction expenditure. This represents a meaningful downside surprise relative to our 1Q26 expectation that construction would remain one of the primary near-term growth drivers, supported by public infrastructure.
Private construction indicators were comparatively more resilient, with the real value of building plans approved and completed increasing by 5.5% y/y, respectively in line with the expectation that private companies will continue to construct as they anticipate opportunities in emerging industries.
The tertiary sector remains the primary structural engine of growth, supported by wholesale and retail trade (+9.0%), health (+17.6%), financial services (+5.5%), hotels and restaurants (+5.5%), and real estate and professional services (+5.2%). Wholesale and retail trade was the largest individual contributor to GDP growth (+0.9ppt), while financial services improved markedly from -0.7% in 2Q25, driven largely by banking activity (+10.0%).
This remains consistent with our view that earlier FDI and project-related inflows continue to circulate through the domestic economy, supporting banking-sector liquidity, operational spending and, increasingly, broader tertiary-sector activity.
The most significant change in the 2Q26 data is the recovery in domestic demand. Private final consumption expenditure increased by 11.6% y/y, reversing contractions of 5.9% in 2Q25 and 11.5% in 1Q26, reflected in stronger supermarket and clothing sales as well as increased imports of finished goods. While this marks a substantial departure from the weak consumption observed in 1Q26, we remain cautious in interpreting it as a broad-based improvement in household spending capacity. Rather, it reinforces our view that earlier Foreign Direct Investment (FDI) and project-related inflows continue to circulate through the domestic economy, supporting liquidity, driving imports, consumption and subsequently tertiary sector activity.
Gross fixed capital formation accelerated to 14.4% y/y, from -4.4% in 2Q25 and 3.4% in 1Q26, driven primarily by machinery and transport equipment. This reinforces our previous assessment that project-related investment was recovering earlier than anticipated and is increasingly feeding through to domestic activity. However, the simultaneous contraction in construction (-15.5%) suggests that investment remains concentrated in machinery and equipment rather than broad-based fixed construction. This is consistent with a shift from exploration and construction-related capital expenditure towards more operational and equipment-intensive spending as we anticipate a Final Investment Decision.
Government consumption provided an additional layer of support, expanding by 6.6% y/y from 4.1% in 2Q25, reflecting increased public-sector employment and expenditure in line with higher inflation, fiscal subsidies and health workers hired during the period. This was, offset by a sharp decline in government construction activity (- 55.1%) highlighting a shift from capital towards recurrent spending during the period. This lifted total final consumption expenditure by 10.4% y/y in 2Q26, reversing the 3.8% contraction in 2Q25.
Stronger domestic demand is partly offset by weakness in the external sector. Real exports increased by only 0.3% y/y, slowing sharply from 20.1% in 2Q25, while imports surged by 12.9%. Consequently, the nominal external deficit widened to N$14.7bn in 2Q26 from N$8.6bn in 2Q25. The acceleration in imports is consistent with stronger consumption and investment, particularly imports of finished, intermediate and capital goods, but also suggests that a meaningful portion of stronger domestic expenditure is coming from imports rather than domestic production.
Our Take: Investment Spillovers Broaden Growth Despite Structural Drags
The 2Q26 GDP print was stronger and more broad-based than we expected, supported by a recovery in private consumption (+11.6%), investment (+14.4%), and wholesale and retail trade (+9.0%). However, imports also rose strongly (+12.9%), suggesting that part of the increase in spending is still being met from outside the domestic economy.
The 4.8% y/y growth rate should also be viewed against a relatively weak 2025 base (1.8%) following upward revisions to 2026. Real GDP increased by only around 0.3% q/q between 1Q26 and 2Q26, suggesting that the economy may be gradually emerging from the recent period of weaker growth rather than experiencing a sharp acceleration. Growth is currently led by agriculture (17.8%), health (17.6%) and wholesale and retail trade (9.0%). However, continued weakness in key sectors such as mining (-3.1%), construction (-15.5%) and electricity and water (-2.6%) suggests that the economy has yet to enter a firm upward growth cycle.
Looking ahead, a resilient tertiary sector, financial services and investment should provide a firmer base for growth. However, persistent income and employment constraints, alongside rising household costs, leave us cautious that stronger consumption reflects a broad-based improvement in household spending capacity without an external stimulus like FID or fiscal spend. Rather, part of the uplift will continue to reflect investor spending circulating through the economy. The key question is therefore who is spending and whether this demand increasingly supports domestic production or is met through imports, which will ultimately determine the sustainability of the recovery long term.
Risks and Outlook
The stronger 2Q26 print and upward revision to 1Q26 shift our outlook away from a structurally weaker growth path towards growth broadly in line with 2025. We now expect real GDP growth of 2.2%–2.9% in 2026, up from our initial 1.2% forecast, conditional on the persistence of consumption and investment activity. Overall, the near-term outlook has improved, but whether this develops into a sustained growth cycle will depend on the domestic transmission of investment spending and the resilience of the agriculture sector to climate shocks.
Risks remain tilted to the downside. Higher inflation and interest rates, compounded by rising global oil prices, could weigh on consumption and increase the import bill in 2H26, pulling growth towards the lower end of our range. Agricultural momentum could also weaken into 2027 as El Niño intensifies, while further delays in final investment decisions or a slowdown in foreign investment-related spending would soften domestic activity.
