Trade deficit widens due to higher imports' bill

20 Aug 2014 16:30pm
WINDHOEK, 20 AUG (NAMPA) – The trade deficit during the first half of 2014 widened further as a result of Namibia’s higher imports’ bill.
These imports consisted mainly of capital inputs, vehicles and other consumer goods, Bank of Namibia (BoN) Governor Iipumbu Shiimi said whilst announcing the new repo rate here on Wednesday.
“The BoN remains concerned about the importation of unproductive goods, especially passenger vehicles and other luxury goods, which continue to exert pressure on the international reserves of the country,” he noted.
On the domestic economy, Shiimi said this is expected to improve for the remainder of 2014, supported by construction activities and strong domestic demand.
The risk to growth remains the declining international commodity prices due to depressed demand, he added.
“Domestic growth prospects continue to be encouraging with the inflation remaining manageable, however, risks remain.
Strong growth in household credit remains a concern, especially when used to finance unproductive imported luxury goods,” said the BoN governor.
On annual inflation, which has been rising in the past six months, Shiimi emphasised that it slowed during the last month.
Inflation rose steadily from 4.9 per cent in January 2014 to 6.1 per cent in May and June 2014, respectively, before dropping to 5.6 per cent in July 2014.
The slowdown in July was reflected mainly in food, transport and housing categories.
Going forward, inflation is expected to average around six per cent for 2014.
Credit to the private sector increased strongly to an average growth rate of 15.3 per cent during the first half of 2014.
It increased from 13.9 per cent during the last six months of 2013.
“The strong demand for credit came from both households and business sectors. The growth in household credit was mainly dominated by instalment credit, overdrafts and other loans and advances, which regrettably are also used to finance unproductive imported luxury goods,” he continued.
Meanwhile, the Monetary Policy Committee (MPC) has decided to increase the repo rate by 0,25 percentage points to six per cent.
This follows the bi-monthly MPC meeting held on 19 August to decide on the monetary policy position for the next two months.