… domestic economy needs boost
WINDHOEK – The Bank of Namibia yesterday announced that the repo rate, the rate at which commercial banks borrow from the central bank, would remain unchanged at 5.50 percent in order to support the domestic economy.
According to the Deputy Governor of the Bank of Namibia (BoN), Ebson Uanguta, persistent global challenges are increasingly presenting downside risks to growth through falling commodity prices, and domestic growth is expected to remain below the targeted level of 7 percent set in the 4th National Development Plan (NDP4) for 2013.
“Inflation has slowed in July and is expected to remain within tolerable levels for the remainder of the year …. Given the abovementioned, BoN’s Monetary Policy Committee is of the opinion that the repo rate needs to be maintained at the current level to support the domestic economy and mitigate the impact of falling commodity prices and suppressed demand for Namibian export products,” explained Uanguta. Selected indicators from the central bank suggest that positive growth persists across various sectors of the Namibian economy and overall growth in the first half of 2013 is expected to be in line with the first half of 2012.
However, the growth forecast is overshadowed by declines in key commodity prices, particularly uranium and copper, high food and energy prices and the negative impact of the current drought. Overall, for the year 2013, BoN projects domestic economic growth to moderate to 4.7 percent, compared to 5 percent for 2012.
Said Uanguta: “The primary industries are estimated to slow to 2.5 percent growth in 2013 due to the drought affecting agricultural output. In addition, some uncertainties in diamond and uranium production are expected to exert a drag on mining sector growth. Similarly, the tertiary industries are expected to slow to 4.5 percent growth in 2013, compared to the growth rate of 6.4 percent experienced in 2012. Growth from the secondary industries is expected to increase in 2013, supported by construction activities.”
Another contributing factor underpinning the decision to keep the repo rate unchanged is Namibia’s inflation rate, which fell to 5.8 percent in July after rising marginally in June. According to Uanguta, the fall was largely on account of a slowdown in price increases in food items, as well as electricity, gas and other fuels. Transport inflation, however, increased in July when compared to June.
However, the central bank expects inflation to remain stable and around current levels for the remainder of the year. Uanguta also remarked that private sector credit extension continues to experience high growth, which has been driven by strong demand for credit from both businesses and individuals, with mortgage loans particularly seeing strong expansion. Installment sales growth remains moderate compared to the high levels seen in 2012.
Namibia’s foreign exchange reserves have increased and at the end of July stood at N$18.1 billion, or 3.5 months of import cover. Uanguta confirmed that these reserves remain adequate to maintain the fixed current arrangement. This increase in foreign reserves is predominantly due to Southern African Customs Union (SACU) receipts of which Namibia recently received N$3.6 billion.
By Edgar Brandt