Namibia cuts rate 3rd time to support weak economy

     Namibia's central bank cut its benchmark repo rate for the second time in less than a month and for the third time this year, saying this was to "support weak domestic activity and provide short-term relief amid the extraordinary circumstances arising from the Covid-19 pandemic."
      Bank of Namibia (BON) cut its rate by a further 100 basis points to 4.25 percent and has cut it by 225 points this year following cuts in February and on March 20.
      "At its new level, the repo rate will provide some short-term relief to borrowers," BON said.
     BON has been lowering its rate since August 2017 and has now cut it four times since then by a total of 275 basis points.
      BON, which pegs its Nambian dollar to South Africa's rand, said the rate cut would not compromise the one-to-one link between the currencies.
     On Tuesday the South African Reserve Bank (SARB) cut its policy rate for the second time in less than a month and for the third time this year as it upped its forecast for economic contraction in 2020.
     This year SARB has cut its repo rate by a total of 225 basis points to 4.25 percent.
     Namibia's economy and inflation slowed in the first quarter of this year while growth in private sector credit extension (PSCE) remains subdued, BON said, adding its stock of international reserves remain sufficient to protect the currency peg and meet international financial obligations.
     As of March 31, reserves rose to N$33.0 billion from N$32.2 billion on Feb. 29, enough for 5.3 months of imports.
     The slowdown in economic activity was mainly seen in the mining, wholesale and retail trade, manufacturing and tourism sectors, with tourist arrivals falling sharply. Transport and storage sectors, however, still showed positive growth.
     "Preliminary estimates indicate that the domestic economy will contract significantly in 2020," BON said, adding average growth in PSCE in the first two months rose 6.7 percent, but since the previous MPC meeting the annual growth declined further to 6.1 percent at the end of February from 7.2 percent in December 2019.
      In 2019 Nambia's economy shrank 1.1 percent due to severe drought and weak mining activity.
     Average inflation in the first three months of this year eased to 2.4 percent from 4.5 percent last year and is forecast to average below 3.0 percent in 2020, BON said.

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