Wednesday, December 12, 2012

Namibia holds rate to help cushion slow global growth

    Namibia's central bank held its benchmark repo rate steady at 5.50 percent, saying low interest rates should be maintained to cushion the impact of slower growth in many trading partners.
    Despite fragile global growth and the uncertain outlook, the Bank of Namibia said domestic growth remained relatively strong and inflation "remains at tolerable levels" although it was rising.
    In August the central bank cut its rate by 50 basis points to counter the weak global outlook.
    A rise in inflation to 7.1 percent in October from 6.7 percent was mainly due to higher food and beverage prices and given the almost 30 percent weighting of food items in the inflation basket, this alone can influence the direction of headline inflation, the central bank said.
    "The majority of food inflation experienced in Namibia remains driven by external cost-push factors, which are out of Namibia's control," the bank said in a statement, adding that transportation also pushed up inflation.
    Namibia's economic growth is expected to ease to 4.6 percent this year from 2011's 4.8 percent, with growth mainly driven by mining activities.

    Namibia's Gross Domestic Product expanded by 1.6 percent in the second quarter from the first for annual growth of 8.9 percent, up from 3.7 percent in the first quarter.
    The bank said credit extended to the private sector rose by an annual 16.6 percent in October - "which illustrates sustained demand for credit as a result of the accommodative policy stance" - the highest level of credit growth in 5-1/2 years, driven by credit to businesses which rose 21.1 percent annually.
    Credit to individuals eased to 14 percent in October from 14.7 percent, but the bank said this was still an elevated level. It noted that instalment credit growth had slowed to 15.2 percent from 19.5 percent and if this trend was sustained, it could help stabilize the high level of individual debt.


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