To preserve the one-to-one peg between the Namibia Dollar and the South African Rand and to protect the domestic economy, the Bank of Namibia’s Monetary Policy Committee (MPC) decided to leave the repo rate unchanged at 7.75%. This is after the MPC held its third bi-monthly meeting on 17 and 18 June to decide
on the appropriate monetary policy stance to be implemented over the next two months.
“It was not unexpected, but disappointing for the property market,” commented independent economist Josef Sheehama.
“Given that inflation has, against expectations, been declining to 4.90% compared to 2023’s corresponding month at 6.3%, the decision was the right one, but painful,” Sheehama commented. He pointed out that this means both property-seekers, including first-time buyers and sellers, are facing difficulties in the current market.
“The loan-to-value ratios, which were expected to strengthen the domestic property market, will not yield expected results. Therefore, for sellers to draw in buyers, accurate pricing will now be their primary concern,” he stated.
Meanwhile, the central bank noted that domestic economic activity increased during the first four months of 2024.
“Inflation slowed year-to-datem but edged higher since the previous MPC meeting, while the growth in Private Sector Credit Extension (PSCE) remained subdued. The merchandise trade deficit widened, while the stock of international reserves remained sufficient to support the currency peg and meet the country’s international financial obligations,” Bank of Namibia governor Johannes !Gawaxab stated yesterday.
He clarified that an increase in domestic economic output mainly emanated from the mining, electricity- generation, wholesale and retail trade, tourism, communication and transport sectors. Looking ahead,!Gawaxab expects growth in Namibia’s real gross domestic product (GDP) to moderate from 4.2% in 2023 to 3.7% in 2024 due to the anticipated slowdown in the primary industry, partly as a result of the drought conditions.
The central bank governor added that risks to the domestic economic prospects from both external and domestic factors have on balance remained broadly the same since the previous MPC meeting.
“External risks reflect the prolonged tight global monetary policy stance, disruptive geopolitical tensions and geo-economic fragmentation as well as China’s faltering recovery.
Risks further include negative spillover effects from the election and the electricity situation in South Africa, both of which have softened. At the
same time, risks from adverse developments in the international diamond market have increased, negatively impacting diamond prices, and therefore warrant monitoring, going forward. Internal risks remain
the drought and water supply interruptions, particularly at the coastal towns,” said !Gawaxab.
Meanwhile, domestic inflationary pressures continue to ease. On average, domestic inflation slowed to 4.9% during the first five months of 2024, compared to 6.8% during the same period in 2023. Official statistics indicate the deceleration was predominantly due to lower food inflation.
Since the previous MPC meeting, however, monthly annual inflation edged up to 4.9% in May 2024, relative to 4.5% for March 2024. This is attributed to increases in transport and housing inflation. Going forward, the Bank of Namibia expects average inflation to moderate from 5.9% in 2023 to 4.9% in 2024, and 4.5% in 2025.
Moreover, Namibia’s merchandise trade deficit widened to N$13.5 billion during the first four months of 2024, compared to N$9.1 billion during the corresponding period of 2023. !Gawaxab explained that the widening of the trade deficit was mainly due to a fall in export earnings, reflecting lower volumes and realised prices for diamonds, coupled with a lower volume of uranium exports. “The higher import payments for consumer goods, machinery, base metals and products of the chemical industry further contributed to the rise in the trade deficit,” he stated.