Prices increased at a slow pace in November

Inflation recorded at 5.7%
The Bank of Namibia (BoN) projects inflation to average 5.9% in 2023.
Phillepus Uusiku
Inflation in Namibia stood at 5.7% in November, a decline when compared to 6% and 7% recorded in October 2023 and November 2022 respectively, according to the Namibia Statistics Agency (NSA).
However, this does not mean that the prices of goods and services decreased. Prices rather increased at a slow pace compared to the previous period.
The major contributors to the annual inflation rate of 5.7% in November 2023 were food and non-alcoholic beverages (1.8 percentage points); alcoholic beverages and tobacco contributed (1.1 percentage points); transport; and housing, water, electricity, gas, and other fuels each contributed (0.8 percentage points.
The Bank of Namibia (BoN) estimates that inflation will average around 5.9% in 2023. IJG Securities forecast the inflation rate to end 2023 between 5.6% and 6.4%, and for it to slow to around 4.3% in 2024.
The Bank of Namibia on Wednesday decided to keep the repo rate unchanged at 7.75% for the third consecutive time this year. Similarly, the South African Reserve Bank (SARB) last month decided to keep the repo rate unchanged at 8.25% for the third consecutive time in 2023.
“We anticipate that SARB will keep its repo rate at 8.25% until the fourth quarter of 2024 to anchor South African inflation expectations. We expect the BoN will follow suit, with the Namibian repo rate falling back to 7.5% in the fourth quarter of 2024. That said, given the recent lowering in global interest rate expectations and weaker global oil prices due to growth concerns in the US and China, the probability that interest rates could fall faster than we are currently projecting is rising,” PSG said.
The Bank of Namibia remains comfortable maintaining the negative 50 basis points gap between the Namibian and South African repo rates. The strengthening of Namibia’s forex reserves and the lack of speculative behaviour have relieved pressure on the BoN to keep the Namibian repo rate above the South African equivalent to deter capital outflows, PSG added.
As at 30 November 2023, the stock of international reserves stood lower at N$49.0 billion, compared to N$51.4 billion recorded at the end of October 2023, predominantly on account of higher net commercial bank outflows. At this level, the stock of international reserves is estimated to cover 5.1 months of imports, thereby remaining sufficient to support the currency peg between the Namibia dollar and the South African rand while meeting the country’s international financial obligations, the central bank pointed out.
Simonis Storm projects that Namibia will likely implement its initial rate reduction in the latter half of 2024. “We foresee this adjustment to be a modest decrease of 25 basis points, which is indicative of a shifting monetary landscape towards a more accommodative stance.”[email protected]