The Impacts of Food- and Oil Price Shocks on the Namibian Economy: the Role of Water Scarcity

The recent increases in international food and oil prices have raised concerns about how these exogenous shocks will affect the economic activity as well as poverty in developing countries. In this paper, the effects of international food and oil price increases on the Namibian economy are studied by means of a Computable General Equilibrium model. As a corn and oil importing Sub-Saharan African country, Namibia is among the countries considered to be particularly vulnerable to these price shocks. Besides, since Namibia is also one of the driest Sub-Saharan countries, the role of water scarcity is explicitly addressed in this particular context. The results show that the Namibian economy will be negatively affected by the food and oil price increases. In the case where the supply of water is assumed to be constant, it is shown that there will be even less ability to adapt for the economy, thus resulting in a more significant decrease in GDP than in the case where additional water sources are assumed to be available.