By: Justicia Shipena
With the inflation increase, economists at Simonis Storm project that the Bank of Namibia (BoN) will hike the repo rate by 25 basis points.
The central bank is expected to announce the repo rate on 19 April, after the Monetary Policy Committee (MPC) in February resolved to increase the repo rate by 25 basis points to 7%.
The Namibia Statistics Agency (NSA) yesterday announced an inflation rate increase of 7.2% for the month of March.
“With the latest inflation print not moving closer to 6%, we anticipate the central bank to hike the repo rate by 25 basis points on 19 April,” Simonis Storm said.
The financial research firm in its inflation report for March said during the last MPC dialogue, BoN governor Johannes !Gawaxab acknowledged that not all members agreed on a rate hike, but their views were outnumbered.
In this light, Simonis Storm said it expects that the central bank will not take an overly aggressive approach.
“Local interest rate hikes will continue to be implemented until inflation shows signs of moving closer to 6% as outlined in our previous reports.”
According to the report, food inflation has consistently moved in line with headline inflation, which could be indicative of its driving nature and due to the fact that it has the second largest weight in the consumer price basket.
It said annual food price inflation is almost double that of headline inflation and will likely remain the key driver of local inflation for the remainder of 2023.
In addition, it said, food shortages in South Africa, due loadshedding and Namibia (inadequate rainfall), are being forecasted, making Namibia more vulnerable to global food prices.
At the same time, Simonis Storm said a weaker Rand exchange rate is being forecasted for 2023, which would also add to inflationary pressures for food products.
The International Research Institute for Climate and Society (IRICS)indicated there is a 40% probability that Namibia will receive below-average rainfall.
“Combined with a weakening rand/US dollar exchange rate, food prices are expected to increase. The rand has weakened by 7.2% YTD against the US dollar and we forecast an average 17.80 Rand/US dollar exchange rate for 2023,” Simonis Storm said.
Hence the firm forecasts food prices will remain the main driver of inflation in Namibia for 2023.
In its Namibia consumer price index report, NSA stated that the annual inflation rate increased by 7.2 percent compared to 4.5% recorded in March 2022.
“On a monthly basis, the inflation rate increased by 0.6 percent compared to 0.4 percent recorded a month earlier,” said Alex Shimuafeni, NSA Statistician-General and CEO .
Shimuafeni said the the zonal inflation rates for the month of March 2023 revealed that Kavango East, Kavango West, Kunene, Ohangwena, Omusati, Oshana, Oshikoto, Otjozondjupa, and Zambezi recorded the highest annual inflation rate of 7.7%.
This was followed by //Kharas, Erongo, Hardap, Omaheke which recorded an annual inflation rate of 7.2%, while Khomas recorded a lowest rate of 6.6%.
He said analysis of the average retail prices of selected products for the month of March 2023 shows that consumers in the Khomas region paid the highest price for pure 750ml sunflower oil at N$37.41. Followed by //Kharas, Erongo, Hardap and Omaheke at N$36.81, while consumers in Kavango East, Kavango West, Kunene, Ohangwena, Omusati, Oshana, Oshikoto, Otjozondjupa, and Zambezi paid the lowest price of N$36.05.
When it comes to stewing beef, consumers in the Khomas region paid the lowest price at N$89.99/kg, while the highest price was recorded in Zone 3 at N$94.57/kg.
For Eggs (pack of 6), consumers in Zone 1 paid the lowest price at N$21.15, while the highest was paid by Zone 2 consumers at N$23.04, he said.