The Impact Of Balance Of Trade On Economic Growth In Namibia

After independence in 1990,Namibia has gained fast economic growth and an increase in foreign trade growth.However,Namibia is a small open economy and a developing country;therefore it is worthy to study the effect of trade balance on the economic growth of Namibia.In order to study the effects of trade balance on economic growth of Namibia,this paper adopt 36 years' annual data sets from 1980-2015 and,used expenditure approach of GDP to calculate the contribution to trade balance.Thus,multivariate linear regression model to analyze the variables of effect of trade balance.The purpose of the study is to investigate the mechanism of trade effect on the economic growth,especially after entering the Southern African Customs(SACU).Furthermore,to analyze the nature of the relationship between exports,imports on economic growth in Namibia.The research results show that consumptions expenditure,investment expenditure and government expenditure all holds positive impact in expenditure approach of GDP.Additionally Namibian trade balance holds a negative impact on economic growth from a quantity of perspective.The net exports hold a deficit balance causing the trade deficit of the country to decrease the national output by negative 7.78%.Multivariate regression model was used to analyze the relationship between the economic growth of exports and imports.The results show that export holds a positive effect on economic growth;however,import holds a negative effect,as well as joining SACU.Granger causality test shows that GDP is the granger reason of export and import,but export and import are not granger reason of GDP because the probability value is less than 5% hence we fail to reject the null hypothesis.To explain the results,it is necessary to further study the commodity structure of exports and imports.The research further found out that the top five imports commodities are vehicles,ships boats floating structures,boilers machinery mechanical appliances commodities,mineral fuels and oils,electrical machinery,and the top five export commodities are previous stones(diamonds),ships boats and floating structures,ores,fish,copper articles thereof,which indicates that Namibia is still in the early stage of economic growth,the industrialization is lower,so it exports primary products and imports manufactured goods and energy.From this point of view,Namibia's trade balance deficit provides means production,which has an adverse affect to economic growth in a short term,but is benefit for a long term.The study suggests that Namibia should improve the ability of export and improves its competitiveness in world market to stimulate the economic growth.The need to increase additional value for exports products for example promoting manufacturing and processing of goods for trade purposes.Namibia should also see the sights in superior terms opportunities in being a membership of SACU,while improving in breaking new basis for its exports through new trade agreements and partnerships.Namibia can also use foreign capital to make the manufacturing process a perfection to promote exports commodity structure,which leads to a better balance of trade and economic growth.