Inflation rate falls to housing and food

23 Dec 2015 12:00pm
WINDHOEK, 23 DEC (NAMPA) – Namibia’s annual inflation rate fell to 3,3 per cent during the third quarter of 2015 from 5,4 per cent in the corresponding quarter of 2014.
A statement on the domestic economy during the third quarter (June to September) issued by the Bank of Namibia (BoN) on Friday singled out food consumption, transport and housing as key factors that attributed to the slowdown.
The BoN noted that growth in broad money – all money in circulation including domestic deposits and easily accessible accounts- supply slowed, supported by a reduction in net foreign assets and slower growth in domestic claims.
The BoN on 16 December decided to keep the repo rate at 6,5 per cent in response to a downward trend in credit instalment to households, which followed a warning issued by the BoN in June that instalment credit to households for the purchase of unproductive luxuries had the central bank increase the repo rate to 6,50 per cent.
The statement said the domestic economy however displayed signs of satisfactory performance, saying increased production in diamonds, zinc concentrate and gold; robust construction activities and an increase in wholesale and retail trade sustained the positive momentum.
Growth in credit extended to the private sector rose as demand for credit from both the business and household sector increased.
The value of Namibian dollar weakened against all major trading currencies both on an annual and quarterly basis, and the poor performance is endorsed by a decline in commodity prices.
An Investment Strategist at Capricorn Asset Management, Suta Kavari told Nampa downward pressure on inflation was largely due to lower petrol prices.
“Cheaper petrol will bring relief in the short term. The currency volatility poses significant risks to the inflation outlook and continuing drought conditions will also start pushing up food prices going into next year,” he said.
There are looming fears that the slowdown in economic growth would negatively impact export earnings from metals such as copper and zinc, while the current deficit of the South African Rand may result in increased prices of imported goods and services.
“The weaker Rand is likely to fuel inflation and poses significant upside risks to the inflation outlook in both South Africa and Namibia, putting pressure on both central banks to raise interest rates further,” Kavari warned.
The South African Rand after the first week of December hit a record low of about 15.30 to the Us Dollar following the dismissal of the country’s finance minister and the appointment of a Member of Parliament who has not been featuring in the media. That appointment did not last very long and President Jacob Zuma about five days later gave in to market pressure and reappointed former finance minister, Pravin Gorhan, who then promised to restore the country’s crippling economy.
On a positive note, increasing demand and rebound in uranium prices might come in handy and boost the domestic Gross Domestic Product (GDP) of the domestic economy.
The statement further said that economic activities increased in the Eurozone but slowed in the UK and US.
The Japanese economy is showing good signs as it recovers from a slump experienced last year, while India continues to be strong and China is slowly regaining momentum.
Kavari asserted that the dependency of the Namibian economy on foreign imports has enjoyed 'moderate' growth over the past years fuelled by positive developments in growing sectors such as mining and construction.
“Namibia has a diversified economy, able to cushion shocks to the growth outlook and as a net importer, the country will always be dependent on imports. That’s not necessarily a bad thing,” he said.