Drop in inflation a plus for consumers/business- Economist

 

A recorded drop in annual inflation brings relief to consumers as well as the business sector, a local economist has noted following the release of inflation figures by the National Statistics Agency.

 

The annual inflation rate dropped further to 4.7% in January from 5.1% in December and 5.6% in November 2018.

 

It is, however, 120 basis points higher than in January 2018 (3.6%).

 

Commenting on the figures, economist Klaus Schade said not all households will benefit to the same extent from the slowdown in price increases.

 

He said poor households that spend most of their income on food, and a lower share than the average household on transport and rent in particular in rural areas, will struggle more to make ends meet.

 

“Due to the existing dry spell, we expect food prices to remain under pressure.  In addition, further price increases for alcoholic beverages and tobacco products can be expected this month with the annual increase in excise duties.”

 

“Despite upward price pressure in some categories, inflation is expected to remain well within the 3% to 6% band targeted by the South African Reserve Bank. Therefore, and given the economic climate, interest rate increases are unlikely this year,” he said.

 

Research analyst at PSG Namibia Shelly Arnold said the inflation outlook has improved from a couple of months ago, particularly for the first quarter of this year, given the fall in oil prices and the stronger domestic currency towards the end of last year.

 

She added that expectations of tighter global monetary policy have also eased due to concerns over slower global growth.

 

“We still forecast the average Brent oil price will come in lower in 2019 compared to 2018, which is supportive of more subdued transport price inflation. However, global oil prices have started to recover in January on the back of renewed pledges from major oil producers to cut back on supply and the impact of economic sanctions against Venezuela,” she said.

 

She said inflation risks relate to renewed Namibian dollar (pegged on par with the South African rand) weakness due to South Africa’s energy, labour and political woes as well as higher food prices.

 

“Maize prices have risen in recent months due to weaker production in the Southern African region. Given that inflation is expected to remain within an acceptable level and economic growth remains lacklustre, we expect the repo rate to remain unchanged until at least H2 2019,” she said.