Third rate cut in a row

The Bank of Namibia (BoN) yesterday cut its repo rate by 25 basis points for the third consecutive time, bringing the main interest rate to 7.0%.A year ago, the central bank’s repo rate stood at 7.75%.The last time the BoN’s repo was 7.0%, was in March last year.“Noting the relatively high level of domestic real interest rates, the ongoing need to support the domestic economy, the adequate level of foreign reserves, orderly capital flows, and recent monetary policy easing trends in key central banks, the MPC [Monetary Policy Committee] unanimously decided to reduce the repo rate by 25 basis points to 7.0%,” BoN governor Johannes !Gawaxab said.He added that commercial banks are accordingly expected to reduce their lending rates by 25 basis points, bringing their prime rate to 10.75%.This is welcome news to the private sector whose debt at local commercial banks exceeded N$115 billion by the end of October. Businesses owed the banks nearly N$47.2 billion, while household debt totalled about N$68.3 billion.EconomyDomestic economic activity strengthened during the first ten months of this year relative to the same period in 2023, !Gawaxab said. “The expansion was primarily driven by the mining, electricity generation, wholesale and retail trade, tourism, communication and transport sectors, and the livestock marketing subsector. However, the diamond and crop production subsectors contracted during the period under review, while the construction sector remained subdued.”Annual growth in private sector credit extension (PSCE) remained subdued, !Gawaxab said. PSCE growth averaged 2.2% during the first ten months of this year, lower than the 2.5% recorded during the same period in 2023. “The sluggish growth has been attributed to weak demand, reinforced by the high-interest rate environment,” he added. Since the last MPC meeting, however, annual growth in PSCE improved to 3.4% at the end of October, up from 2.1% at the end of August, driven by both businesses and households.InflationDomestic inflation decelerated further since the last MPC meeting, !Gawaxab said. Inflation averaged 4.5% in the first ten months of 2024, a notable deceleration compared to 6.0% during the same period in 2023. Similarly, inflation slowed from 3.4% in September to 3.0% in October. “The inflation rate registered in October 2024 is the lowest since February 2021. The disinflationary trend is attributed to the sustained lower average food inflation and, most recently, the deceleration in transport inflation,” !Gawaxab said. “Looking ahead, the medium-term inflation projection remains unchanged from the previous MPC meeting, with forecasts of 4.3% for 2024 and 4.0% for 2025,” he added.TradeNamibia’s merchandise trade deficit widened further, reaching N$31.6 billion during the first ten months of this year, relative to N$28.2 billion during the corresponding period of 2023. “The wider trade deficit is largely due to increased import payments, especially in the categories of consumer goods, machinery and base metals,” !Gawaxab said. “The impact of higher imports on the trade deficit was, however, partially offset by a rise in export receipts, notably from uranium and gold,” he added.ReservesNamibia’s stock of international reserves rose to N$60.9 billion at the end of October, compared to N$57.1 billion at the end of September, primarily attributed to inflows from the Southern African Customs Union (Sacu). “This level of reserves translates to an estimated import cover of 4.1 months, which remains adequate to sustain the currency peg between the Namibia dollar and the South African rand and to meet the country’s international financial obligations. “Excluding hydrocarbon exploration and appraisal-related activities, the import cover stood higher at 4.9 months,” !Gawaxab said.RisksFrom 4.2% in 2023, Namibia’s real gross domestic product (GDP) growth for 2024 as a whole is projected to moderate to 3.5%, 0.4 percentage point higher relative to the projection at the previous MPC meeting. According to !Gawaxab, risks to the domestic economic outlook stemming from external factors have gained more prominence, while those from domestic factors remained broadly stable relative to the previous MPC meeting. “External risks include the escalation of geopolitical tensions, geoeconomic fragmentation, and weaker global demand. Other risks are sovereign debt distress, renewed fluctuations in commodity prices, and the contraction in the Chinese property market. “Internally, drought conditions and water supply interruptions continue to pose downside risks to the growth outlook, particularly in coastal towns,” !Gawaxab said.

Third rate cut in a row

Kommentaar

Republikein 2025-01-10

Meld asseblief aan om kommentaar te lewer

Third rate cut in a row

Kommentaar

Republikein 2025-01-10

Meld asseblief aan om kommentaar te lewer

MELD AAN

Advertensie