Consumers can breathe slightly easier because the Monetary Policy Committee (MPC) of the Bank of Namibia yesterday confirmed it has kept the repo rate unchanged at 7.00 percent. The repo rate is the rate at which commercial banks borrow money from the central bank and directly influences interest rates of consumers.
According to the MPC, the unchanged repo rate remains appropriate to support growth, while maintaining the one-to-one link between the Namibia Dollar and the South African Rand. The MPC took the decision on Tuesday this week during its bi-monthly meeting.
This decision was taken following a review of global, regional and domestic economic and financial developments. The next meeting of the MPC will be held on June 13.
“The domestic economy slowed in 2016 compared to 2015, while overall inflation rose during the first two months of 2017. Growth in private sector credit slowed over the same period and the stock of international reserves remained sufficient to meet the country’s foreign obligations,” said Governor of the Bank of Namibia Iipumbu Shiimi in a statement released yesterday.
Shiimi noted that the domestic economy grew by only 0.2 percent during 2016, compared to the stronger growth of 6.1 percent in 2015. “Early indications are that this weakness in growth has continued during the first two months of 2017. The slowdown was mainly attributed to a bleak performance in the mining sector, particularly diamond production,” he said.
Output in the manufacturing sector, especially the production of cement, refined zinc and blister copper, as well as the wholesale and retail trade sector, which has been resilient in the recent past, also fell. Likewise, private and government construction works contracted.
In contrast, cargo volumes in the transport subsector and value addition in the communication subsector rose over the same period,” Shiimi noted.
Meanwhile, inflation remained high in the first two months of 2017, as it increased from an average of 6.7 percent in 2016 to 8.2 percent in January 2017, before slowing to 7.8 percent in February. The high levels in 2017 were mainly driven by the rise in the inflation rates for major categories, such as housing, water, electricity, gas and other fuels and transport, as well as food.
Shiimi also pointed out that over the first two months of 2017, the growth in private sector credit extension (PSCE) slowed.
“The annual growth in PSCE slowed from a peak of 13.7 percent in January 2016, to an average of 8.8 percent in the first two months of 2017. This was due to reduced growth in credit advanced to both the corporate and individual sectors, especially mortgage and installment credit,” he explained.
The country’s preliminary stock of international reserves stood at N$22.3 billion at the end of March 2017.
“At this level, the stock of international reserves was estimated to cover 2.7 months of imports. The stock of international reserves remains sufficient to sustain the one-to-one link of the Namibia Dollar to the South African Rand,” Shiimi noted.
Since the last MPC meeting in February 2017, monetary policy stances in both key advanced economies and EMDEs generally remained accommodative. Brazil and Russia cut their benchmark rates to support their economies, while the U.S. raised its benchmark rate by 25 basis points.
Global growth, which remained weak in 2016, is however projected to improve in 2017. Both key advanced economies and Emerging Market and Developing Economies (EMDEs) maintained accommodative monetary policies since the last MPC meeting, except for the United States of America, which raised its policy rate.
Annual global growth is projected to pick up to 3.4 percent in 2017, on account of increased economic activity, both in the advanced economies and EMDEs. This growth is slightly higher than the annual growth rates of 3.2 percent in 2015 and 3.1 percent estimated for 2016.