Rand Merchant Bank (BMB) has revised its growth estimates for the Namibian economy upwards to 4.9 percent in 2015 and expect a gradual increase over the next two years.
In the latest RMB Global Markets Research, Sub-Saharan Africa Outlook, dated May 28, 2015, which was released last week, Namene Kalili, Senior Manager Research and Development at FNB Namibia Holdings explained: “The revision was due to unexpectedly higher growth in consumer demand so far this year. However, agricultural output was changed downwards after a disappointing rainy season and significant layoffs in the agricultural sector.”
Kalili added in the Namibian section of the RMB report that growth was decoupling from South Africa on the back of strong construction, mining and electricity sector growth.
“Nevertheless, possible electricity supply shortages, low export commodity prices and rising inflation pose downside risk to the economic outlook,” he stated.
Fitch Ratings has affirmed Namibia’s sovereign rating at ‘BBB-’ with a stable outlook. The agency cited continued strong growth driven by robust domestic demand and including high public and private investment.
It expects the trend to continue in 2016 as a result of increases in uranium and gold output, as well as a positive performance in the construction and retail sectors.
Regarding inflation, Kalili advised that headline inflation dropped to 2.9 percent year-on-year in April from 3.4 percent in March, mainly due to price deceleration in food and non-alcoholic beverages, transport, communications and recreation – transport disinflation remained the driver for low inflation.
“This has prompted a downward revision of our inflation to 5.1 percent for the year. Regardless of the deceleration, inflationary pressures remain. Near term data suggest inflation is bottoming out and is expected to pick up as electricity hikes and rising fuel prices are factored into the economy.”
On the topic of monetary policy Kalili said the benchmark policy rates remained unchanged at the last Monetary Policy Committee meeting in April and the central bank was still assessing the impact of the February rate hike.
Although growth in overdrafts to individuals contracted, the central bank remained concerned about instalment credit growth to individuals (which exerted unnecessary pressure on foreign exchange reserves – reserves have declined by 18 percent to a three-year low). “We face a possible interest rate dilemma as consumption and private sector credit extension have not reacted to the 75 basis point interest rate hikes over the past nine months.”