14 Mar 2016 19:10pm
WINDHOEK, 14 MAR (NAMPA) - Food prices will remain high for the foreseeable future due to reduced food production coupled with increasing import costs from South Africa as a result of the Rands depreciation.
Investment Strategist at Capricorn Asset Management, Suta Kavari issued the warning on Monday in a media statement with the heading 'Drought starts to bite, as inflation spikes'.
Food prices will likely continue on this upward trajectory as drought conditions persist. Food prices, maize prices in particular, have increased close to 30 per cent this year alone, as supply declines on the back of persistent drought in the southern African region and the weakening Namibian Dollar, he stressed.
Inflation in Namibia accelerated sharply in January as the effects of the severe drought translated into higher food prices. The drought-induced increase in food prices combined with a weaker currency and the lower base for petrol prices pushed up inflation to 6,1 per cent from 5,3 per cent posted in December. Food and non-alcoholic beverages rose 7,2 per cent year-on-year, largely on account of a 7,5 per cent increase in food inflation. Bread and cereals rose 9,9 per cent due to the surge in grain prices.
Downward pressures from falling global oil prices have started to fade, and it is expected that petrol inflation will also start picking up.
Kavari warned the increase in sin-taxes, announced in the 2016/2017 National Budget in February, will push up alcohol and tobacco inflation, adding to the upward pressure on inflation.
He emphasised the drought conditions around the country have exerted pressure on food production, reflected in the reduced domestic cereal harvest.
While future interest rate hikes in Namibia will largely depend on the South African Reserve Banks tightening cycle, the Bank of Namibia will also be cognisant of trying to maintain local price stability.
With inflation largely having been muted in 2015, we expect inflation to average six per cent in 2016 and remain largely elevated at around the six per cent band, added Kavari.