WINDHOEK – After a review of global, regional and domestic economic and financial developments, the Bank of Namibia’s Monetary Policy Committee (MPC) yesterday announced that the country’s repo rate will remain unchanged at 6.50 percent. The MPC determines the repo rate, i.e. the rate at which commercial banks borrow from the central bank, on a quarterly basis. The next meeting of the MPC will be held on 3 December.
According to a statement issued yesterday by Bank of Namibia Governor, Iipumbu Shiimi, the MPC took this decision in order to continue supporting domestic economic activities and to maintain the one-to-one link between the Namibia Dollar and the South African Rand.
Shiimi further noted that domestic economic activity slowed during the first eight months of 2019 while the inflation rate remained low and the growth rate in private sector credit extension (PSCE) was broadly flat.
He added that the stock of international reserves continued to be sufficient to support the currency peg with the South African Rand.
“Domestic economic activity continued to slow during the first eight months of 2019, compared to the corresponding period of 2018. The slowdown was reflected in sectors such as mining, construction, wholesale and retail trade and agriculture. On the contrary, the manufacturing sector improved during the same period. Going forward, the domestic economy is projected to remain weak in 2019,” read Shiimi’s statement.
He continued that the inflation rate declined further to an average of 4.1 percent during the first nine months of 2019, down from its recent peak of 5.6 percent observed in November 2018. Attributing the moderation to a decline in housing and transport inflation, Shiimi added that on a monthly basis the inflation rate declined further to 3.3 percent in September 2019, from 3.7 percent in August 2019, noting that overall inflation is projected to average 3.9 percent in 2019.
Furthermore, annual average growth in PSCE was slightly higher at 6.9 percent during the first eight months of 2019, compared to 6.0 percent in the corresponding period of 2018.
“The increase in PSCE was mainly due to a higher uptake of credit by businesses in the retail, real estate, financial and service sectors. In contrast, growth in credit extended to individuals declined during the first eight months of 2019 compared to the same period in 2018. Since the previous MPC meeting, the annual growth in PSCE slowed to 6.4 percent at the end of August 2019, from 7.8 percent reported in the previous MPC statement,” said Shiimi.
Regarding the stock of international reserves, Shiimi said this stood at N$32.3 billion, compared to N$35.2 billion reported in the previous MPC statement mainly due to increased foreign outflows as at 30 September, 2019. This amount of international reserves is estimated to cover 4.3 months of imports of goods and services. At this level, the reserves are sufficient to protect the peg of the Namibia Dollar to the South African Rand and meet the country’s international financial obligations.
On the global front, Shiimi stated that economic growth slowed during the second quarter of 2019. Inflation rates in key advanced economies (AEs) remained low while increasing slightly in a number of emerging market and developing economies (EMDEs). As a result, monetary policy stances in several key monitored economies eased. “Global economic growth slowed during the second quarter of 2019, mainly due to lower growth observed in the AEs, except for Japan. Going forward, growth in the global economy is projected to slow down further to 3.0 percent in 2019 before recovering to 3.4 percent in 2020,” said Shiimi.