Windhoek-Local businesses should take advantage of the prevailing low interest rates in the domestic financial market to increase the tempo of growth in the economy. This was the advice given yesterday by the Bank of Namibia Governor, Iipumbu Shiimi, when he announced that the central bank’s Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 6.75 percent.
The repo is the rate at which commercial banks borrow money from the central bank, which in turn determines the interest rates that commercial banks charge their clients.
“There are so many opportunities in the economy right now. Businesses should go to their banks with good proposals. Growth is slow right now in the domestic economy and businesses can boost this growth with aggressive investment strategies,” said Shiimi.
At the quarterly MPC announcement, Shiimi said that while overall growth in the domestic economy remains weak, some key economic indicators improved during the first eight months of the year compared to last year. “These positive developments were concentrated in only a few sectors, notably mining and agriculture. Output in the construction, wholesale and retail trade as well as transport sectors however declined.”
And while Shiimi encouraged businesses to borrow to increase the size of their operations, he advised households to do just the opposite.
“I will not encourage households to borrow but to save and invest,” he advised while specifically discouraging borrowing for unproductive purposes such as vehicle purchases.
He further noted the slowdown in the annual growth of private sector credit extension (PSCE), which stood at 7.4 percent thus far this year compared to 12.1 percent for the same period last year. “The subdued growth in PSCE is in line with the generally weak growth within the domestic economy. The slower growth in PSCE was evident in reduced growth in credit advanced to both the household and corporate sectors, especially in the form of mortgage and instalment credit. PSCE growth slowed further to 6.2 percent in August 2017.”
The BoN governor said that although inflation continues on a downward trend, averaging 6.5 percent during the first nine months of 2017, this is the same as recorded during the corresponding period of 2016.
“On a monthly basis inflation slowed from its peak of 8.2 percent in January to reach 5.6 percent in September 2017, mainly driven by lower inflation for food and non-alcoholic beverages. This rate of inflation is, however, slightly higher than its level of 5.4 percent recorded in August 2017.”
The governor also touched on the growth in the global economy, which is projected to grow by 3.6 percent in 2017, compared to 3.2 percent in 2016. This growth is expected to be supported by firm growth in both advanced economies, as well as in emerging market and developing economies.
“Global growth will be reinforced by improvements in investment trade and industrial production, coupled with strengthening business and consumer confidence,” Shiimi explained.