WINDHOEK - The Bank of Namibia’s Monetary Policy Committee (MPC) yesterday announced that the Repo rate has been left unchanged at 6.75 percent to continue supporting domestic economic growth. The Repo rate is the rate at which commercial banks borrow money from the central bank and therefore determines the interest rates charged by banks. The ne3xt MPC announcement is expected in April.
An increase in the Repo rate signals a desire by the Bank of Namibia (BoN) for a slowdown in borrowing and an increase in saving, which would be supported by higher returns emanating from higher interest rates. The opposite strategy applies when BoN reduces the interest rate as this would encourage borrowing from commercial banks due to less interest being charged for consumers.
Yesterday’s announcement was made by BoN’s Deputy Governor, Ebson Uanguta, who pointed out that since the previous MPC meeting in early December 2018, most central banks in both the Advanced Economies (AEs) and Emerging Market and Developing Economies (EMDEs) left their policy rates unchanged, with the exception of the US Federal Reserve and the Bank of Russia who raised the Repo rate while the National Bank of Angola cut policy interest rates.
Uanguta noted that economic growth in the key AEs and EMDEs is estimated to have weakened slightly in 2018, compared to 2017. “Global real GDP growth is estimated to have moderated slightly to 3.7 percent in 2018 from 3.8 percent in 2017, reflecting weaker growth in both the AEs and EMDEs. Going forward, growth in the global economy is projected to slow further to 3.5 percent in 2019, due to a loss of momentum in both the AEs and EMDEs,” said Uanguta.
The economic growth rate for AEs is estimated to have slowed marginally to 2.3 percent in 2018 from 2.4 percent in 2017. The slowdown is on account of weaker performances in the Euro Area, United Kingdom and Japan, whereas growth in the United States accelerated. Growth in the AEs is projected to weaken to 2.0 percent in 2019.
“Among the EMDEs, growth is estimated to have moderated to 4.6 percent in 2018 from 4.7 percent in 2017, mainly dragged down by China, South Africa and Angola. Growth rates in Brazil, Russia and India are estimated to have increased in 2018, compared to 2017. Going forward, the EMDEs are projected to record a marginally slower growth rate of 4.5 percent in 2019. The outcome of the trade negotiations between the largest countries remains a major risk to the global economic outlook with major implications for EMDEs,” Uanguta explained.
Meanwhile, the Deputy Governor emphasised that the domestic economy remained weak in 2018, with both inflation and Private Sector Credit Extension (PSCE) growth slowing down.
“The domestic economy remained weak in 2018 with an estimated further slight decline in real GDP, following negative growth of 0.9 percent recorded in 2017. The weak outcome in 2018 was mainly due to declining economic activity in sectors such as agriculture and wholesale and retail trade. Other sectors, including mining, transport and communication as well as manufacturing improved during the same period. The domestic economy is projected to record positive growth in 2019,” Uanguta stated.
Annual average growth in PSCE slowed marginally to 6.1 percent during 2018, from 6.6 percent in 2017. According to BoN the moderate growth in PSCE was due to reduced demand for credit by both the household and corporate sectors, especially for mortgage, overdraft and instalment credit. Since the previous MPC meeting, the annual growth in PSCE slowed to 6.7 percent at the end of December 2018 from 7.0 percent for October 2018.
2019-02-14 10:16:33 6 months ago