Wednesday, June 15, 2016

Namibia holds rate, inflation seen higher, but manageable

    Namibia's central bank left its benchmark repo rate steady at 7.00 percent to "continue supporting the country's economic growth" amidst a slow and fragile recovery in its trading partners.
    The Bank of Namibia, which has raised its rates twice this year by a total of 50 basis points, added that inflation had risen in the first five months of this year and is expected to increase gradually for the rest of this year, "though remaining within manageable levels."
    Namibia's inflation rate rose to a year-high of 6.7 percent in May compared with January's 5.3 percent. The average rate in 2015 was 3.4 percent.
    Namibia's dollar (NAD) has been firming since mid-January - after depreciating by 25 percent against the U.S. dollar last year - with the central bank's rate hikes supporting the NAD.
    Today the NAD was trading at 15.2 to the dollar, up almost 2 percent this year.
    Despite a decline in the country's international reserves, the central bank said they remain sufficient to sustain the one-to-one line to the South African rand. Reserves amounted to N$22.1 billion as of June 13, down from N$26.6 billion as of April 11.
    The performance of Namibia's economy in the first four months of this year was described as "satisfactory," by the central bank, with growth supported by wholesale and retail trade, government construction and manufacturing.
    In contrast, the mining sector slowed due to a decline in the production of diamonds and zine.
    Growth is expected to remain positive, the central bank said, although the slowdown in its trading partners, soft commodity prices, a volatile exchange rate and drought pose risks.
    Domestic demand, as reflected in private sector credit extension, slowed to average annual growth of 12.9 percent  in the first four months of the year compared with growth of 15.9 percent in the same 2015 period.
   Growth in installment credit, something the central bank has frequently been concerned about, eased to 13.1 percent from 20.1 percent.