Windhoek-Despite the recently announced decrease in the prices of basic food, the reality is that for the next few months Namibian households would be short of money, especially households with meagre incomes. This is because according to the latest inflationary figures January recorded the highest annual inflation in the last seven years.
The last time the prices of essential goods and services went up that high was in October 2009.
It did not help that it is earnings from tourism and wholesale and retail activities that entirely sustained Namibia’s economic growth for 2016. And yet these two sectors still registered low growth figures compared to those of 2015. Other economic activities, including construction and mining – particularly diamond mining and metal ores – as well as agriculture, did very badly.
When compared to the price increases experienced in December, the inflationary figure for January is quite a significant leap. Annual inflation for January came in at 8.2 percent, up from the 7.3 percent recorded in December 2016.
Even though the Bank of Namibia Governor Iipumbu Shiimi says they are “not too concerned” about the high inflation because of the expected slowdown in food prices, analysts do not share such an optimistic view.
In fact, analysts are now cautioning that the pressure on consumers’ pockets could last for the next few months because the spare change provided by the decrease in food prices would be gobbled up by other expenses, especially transportation costs as well as electricity and water bills.
“With the only possible relief coming from announced food price declines, which may be offset by rising transport costs, we expect inflation to remain stoked, exerting continued pressure on households while eroding real returns,” said Ngoni Bopoto, research analyst for Namibia Equity Brokers.
According to the Bank of Namibia, the annual inflation rate for 2016 increased on average to 6.7 percent from 3.4 percent recorded in 2015. Driving up such inflation was the rise in the prices for items such as housing, water, electricity, gas and other fuel, food and transport.
The January inflation rate shot up after having been unchanged for nearly three consecutive months to December 2016. The reason for the spike in inflation is because of the price increase in the services category, mainly in rental payments for flats and houses that went up 7.6 percent month on month, while education went up 7.7 percent.
Bopoto says the January inflation numbers vindicate their earlier view that the inflation trajectory is firmly upward by establishing a high base off which monthly increases will accumulate.
“The increases were across the board and indicative of building inflationary pressure even in the absence of any meaningful currency depreciation,” he says.
Nevertheless, the Bank of Namibia figures show a slowdown in consumer borrowing, something that had been of concern to the Bank of Namibia for some time.
“I am happy to say that this lion we have been fighting for so long has now given up. Things are under control,” said Shiimi when making his monetary policy statement.
Private sector credit was recorded at 11.4 percent in 2016, which is lower than the 15.3 percent in the previous year. Annual growth rate in credit extended to individuals slowed to 10.9 percent in 2016 from 12.8 percent during 2015. The slower growth in credit to individuals was also reflected in overdraft, mortgage and instalment credit, while other loans and advances grew faster in 2016.
“Latest figures show that the downward trend in credit growth continued, with the annual growth of total private sector credit standing at 8.9 percent and for individuals at 9.3 percent in December 2016,” he says.