Namibia’s central bank maintains repo rate at 7%, inflation lower

Windhoek (Capital Markets in Africa) – Namibia’s central bank left its benchmark repurchase rate steady at 7.0 percent, saying economic growth is expected to improve in 2017 after a slowdown this year and expected inflation to lower in 2017.  

The Bank of Namibia, which raised its rate twice this year by a total of 50 basis points, said inflation rose to an average of 6.6 percent in the first 10 months of this year, up from 3.4 percent in 2015, driven by higher prices of housing, water, electricity, fuel, transport and food.  

On a monthly basis, the annual inflation rate rose to 7.3 percent in October from 6.9 percent in September and is expected to average 6.7 percent this year before easing to 5.9 percent in 2017.  

The expansion in private sector credit, which worried the central bank earlier in the year, slowed to an annual rate of 11.8 percent in the first 10 months of the year compared with growth of 15.5 percent in the year-ago period. The slowdown was seen in both corporate and individual credit.  

Namibia’s economy has been hit by lower output of diamonds, zinc, cement, blister copper along with a decline in construction, agriculture and transport. Wholesale and retail trade, however, has been positive.  

For 2016 the central bank forecast growth of 2.5 percent, down from 5.3 percent in 2015, but growth should improve next year.  

In September the International Monetary Fund (IMF) also estimated growth of 2.5 percent this year, with growth seen accelerating to above 5 percent in 2017 and 2018 as production from new mines ramps up.  

In the second quarter of this year, Namibia’s Gross Domestic Product shrank by an annual rate of 1.2 percent from 3.4 percent growth in the first quarter.  

As of Nov. 30, the central bank said the stock of international reserves had risen to N$25.0 billion from 22.6 billion in October , for import cover of about 3.3 months, up from 2.9 months previously reported.