Cost of living continues to escalate

PHILLEPUS UUSIKU

Goods inflation will continue to be the biggest driver of higher local inflation rates, as a result of ongoing global supply chain constraints, elevated prices of commodities used to manufacture merchandise goods and higher global oil prices, Simonis Storm (SS) said.

According to the Namibia Statistics Agency (NSA), the prices of goods and services in Namibia increased by 4.6% in January 2022 compared to 2.7% recorded in January 2021, an increase of 1.9 percentage points.

The highest change in the annual inflation rate were mainly witnessed in the categories of transport (13.5%), hotels, cafes and restaurants 9.0%, furnishings, household equipment and routine maintenance of the house (8.8%), food and non-alcoholic beverages (5.6%), alcoholic beverages and tobacco (3.9%), education (3.3%), recreation and culture registered (2.8%).

Meanwhile, while communications and clothing and footwear registered a deflation of 1.1%and 1.5%, respectively, NSA pointed out.

SS pointed out that some of the global price increases have not fully reached Namibia yet, so consumers can expect higher food prices in future.

This will continue to take a larger share of household budgets which are already stretched and potentially worsen hunger amongst the poor, SS added.

In addition, Cirrus Capital said the strong regional rainfall in January and maintained levels of harvest have aided. However, poor rainfalls in regions like South America will prevent prices from moderating much in the near term.

Cirrus also warned that alcoholic beverages and tobacco prices could tick up in the coming months with the annual sin tax adjustments to be announced in the South African budget scheduled for 23 February 2022.

FUEL

IJG Security notes that the rising tensions between Russia and Ukraine has put markets on high alert for possible disruptions of Russian energy supplies. Coupled with a rebound in the global economy from the pandemic, has resulted in oil prices now trading at 2014 highs.

A lack of production capacity and limited investment in the sector will likely result in fuel prices remaining elevated for the majority of 2022, IJG pointed out.

The Ministry of Mines and Energy decision to increase fuel prices by 30 cents- and 40 cents per litre for petrol and diesel, respectively, in February will keep the transport basket item’s inflation rate elevated going forward, IJG added.

“We forecast an average inflation rate of 4.2% year-on-year in 2022, with risks tilted to the upside, particularly stemming from higher food costs and elevated fuel prices,” IJG [email protected]