WINDHOEK – The Monetary Policy Committee (MPC) of the Bank of Namibia yesterday gave some much-needed positive news when it announced that it reduced the repo rate by 25 basis points to 6.50 percent. This reduction in the repo rate will provide marginal but welcome relief to consumers whose loans like home bonds and car instalments will reduce to a limited extent.
According to Bank of Namibia Governor Iipumbu Shiimi, the MPC took the decision to support domestic economic activity and to maintain the one-to-one link between the Namibia Dollar and the South African Rand. The repo rate is defined as the rate at which commercial banks borrow money from the central bank and this in turn determines the interest rates charged to consumers. When the cost of borrowing goes down for banks, they are able to lower their respective marginal cost of funds-based lending rate, which directly impacts consumer loans.
Making the announcement yesterday, Shiimi noted that domestic economic activity slowed during the first six months of 2019. “The inflation rate declined, while the Private Sector Credit Extension (PSCE) growth rose slightly during the first six months of 2019. The stock of international reserves remained sufficient to support the currency peg,” said Shiimi.
Meanwhile, Shiimi explained that domestic economic activity continued to slow during the first six months of 2019, compared to the corresponding period of 2018. The slowdown, he said, was reflected in sectors such as mining, construction, electricity and wholesale and retail trade. Other sectors, such as manufacturing, transport and communication, improved during the same period. Going forward, the domestic economy is projected to remain weak in 2019.
The average inflation rate declined to 4.4 percent during the first six months of 2019 from its highest level of 5.6 percent observed in November 2018. The moderation was mainly due to a decline in housing inflation. On a monthly basis, inflation declined to 3.9 percent in June 2019, from 4.1 percent reported in May 2019. Overall inflation is projected to average 4.3 percent in 2019.
Annual average growth in PSCE increased to 6.9 percent during the first six months of 2019, compared to 5.9 percent in the corresponding period of 2018.
“The increase in PSCE was mainly due to higher uptake of credit by businesses in the retail, real estate, financial and mining sectors. On the other hand, growth in credit extended to individuals slowed somewhat during the first six months of 2019 compared to the same period in 2018. Since the previous MPC meeting, the annual growth in PSCE increased to 7.8 percent at the end of June 2019, from 7.0 percent reported in the previous MPC statement,” said Shiimi.
As at July 31, 2019, the country’s stock of international reserves stood at N$35.2 billion, compared to N$34.1 billion reported in the previous MPC statement. This amount of international reserves is estimated to cover 4.8 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.
Also, global economic activity weakened during the first half of 2019. Inflation rates in most monitored advanced economies (AEs) and emerging market and developing economies (EMDEs) slowed in recent months. Monetary policy stances in several key monitored economies eased. Global economic growth continued to moderate during the first quarter of 2019, mainly due to lower growth observed in the EMDEs. Going forward, growth in the global economy is projected to slow down further to 3.2 percent in 2019, from 3.6 percent in 2018, as reflected in weaker leading economic indicators.
2019-08-15 07:51:29 2 months ago