IJG projects inflation around 4.3% and 5.2% mark
Within bounds
Elevated fuel prices, currency weakness and volatility, coupled with drought conditions mean inflationary risks remain to the upside.
Namibia’s annual inflation rate edged up to 4.9% in April 2024, from the 4.8% y/y recorded in April. On a month-on-month basis, prices in the overall National Consumer Price Index (NCPI) basket rose by 0.3% month-on-month (m/m). On an annual basis, overall prices in five of the twelve basket categories rose at a quicker rate in May than in April, six categories recorded slower rates of inflation while the education category posted steady inflation.
Both goods and services inflation edged higher in May, with goods inflation coming in at 6.2% year-on-year (y/y) and services inflation at a much more subdued 2.9% y/y.
"The transport category, with a weighting of 14.3% was the largest contributor to overall inflation in May, contributing 1.2 percentage points. This large contribution by the transport category was somewhat expected as fuel prices in May were 14.0% higher on average than they were a year ago, with petrol prices up 16.3% y/y and diesel up 11.7% y/y. The decision of the ministry of mines and energy to keep fuel prices unchanged in June, means that fuel prices are now 16.3% higher on average than they were in June 2023, which should result in the transport category having an even bigger inflationary effect in June.
The food and non-alcoholic beverages basket item, with a weighting of 16.4% was the second largest contributor to May’s NCPI rate, contributing 0.94 percentage point. The alcohol and tobacco category contributed 0.91 percentage points, making the category the third largest contributor to the annual inflation rate," IJG said.
Housing
The housing and utilities basket item only contributed 0.9 percentage point, despite having the heaviest weighing at 28.4%.
"The recreation and furnishings basket categories contributed 0.23 and 0.22 percentage points, respectively, in May. The alcohol and tobacco category posted inflation of 0.1% m/m and 6.6% y/y in May, moderating from the 8.0% y/y recorded in April. Prices of alcoholic beverages rose by 0.1% m/m and 6.5% y/y, while tobacco prices rose by 0.1% m/m and 6.8% y/y," IJG said.
Food and non-alcoholic beverages inflation slowed to 4.7% y/y in May.
This growth is the slowest since March 2022, where the growth was 4.6% y/y, and well off its peak of 14.6% in May 2023. The category posted inflation of 0.5% m/m. Food prices rose 4.2% y/y in June.
Four of the subfood categories recorded quicker inflation than in April. Fruit prices rose 12.4% y/y in May (from 10.9% y/y in April). Prices of sugar products rose 10.5% y/y in May, from the 9.7% witnessed in April. The prices of oils and fats continued to fall, declining by 1.1% y/y.
"Namibia’s inflation rate ticked up moderately in May, primarily driven by the rise in fuel prices in recent months. Elevated fuel prices, currency weakness and volatility, coupled with drought conditions mean inflationary risks remain to the upside. IJG’s inflation model is currently forecasting the annual Namibian inflation rate to average between 4.3% and 5.2% in 2024, with our base case being 4.7%," IJG said.