Namibia Central Bank Leaves Benchmark Rate Unchanged at 7%

Windhoek (Capital Markets in Africa) – The Monetary Policy Committee (MPC) of the Bank of Namibia kept the Repo rate unchanged at 7.00 percent. This rate remains appropriate to maintain the one-to-one link between the Namibia Dollar and the South African Rand, while supporting economic growth in Namibia.

The Namibia economic growth is estimated to have slowed in 2016, compared to the previous year. The slowdown is mainly attributed to the contraction in the construction and mining sectors, in particular diamond mining and metal ores, as well as slower activities in the public sector. The agriculture sector continued to contract in 2016, due to drought, though to a lesser extent than in 2015. Growth in tertiary industries is expected to sustain activities in the economy in 2016, mainly driven by activities in wholesale and retail trade and tourism, although estimated to be lower than that of 2015.

The annual inflation rate increased on average to 6.7 percent in 2016, compared to 3.4 percent in 2015. This was mainly driven by the rise in the inflation rates for major categories such as housing, water, electricity, gas and other fuels, transport as well as food. The annual inflation rate increased to 8.2 percent in January 2017, from 7.3 percent in December 2016. This is the highest since October 2009.

The average annual growth in private sector credit stood at 11.4 percent in 2016, lower than 15.3 percent in the previous year. This was due to lower credit extend to both the corporate and household sectors. Total credit extended to businesses, on average, slowed to 12.1 percent, during 2016, compared to 18.9 percent in 2015. Lower growth was registered across most credit categories, with the exception of other loan and advances, which rose faster from 7.1 percent in 2015, to 10.8 percent during the review period.

The preliminary stock of international reserves stood at N$22.9 billion, as at the 31^st of January 2017. At this level, the stock of international reserves was estimated at 2.8 months of import cover. The stock of international reserves remains sufficient to sustain the one-to-one link of the Namibia Dollar to the South African Rand.