19 February 2018

Namibia: A Year On, Inflation Drops Big

The annual inflation rate for January 2018 stood at 3,6% compared to 8,2% recorded in January 2017.

Thursday's information from the Namibia Statistics Agency further reveals that the slowdown characterised the annual price levels of all the categories comprising the NCPI with the exception of education, transport and health, which expanded to 10%, 6,3% and 6,2% as compared to 8,2%, 5,2% and 5,6% registered during the same period last year, respectively.

Simonis Storm Securites said they are expecting inflation to moderate further mainly due to a higher based effect in 2017 and the continued strengthening of the rand.

"Consumer goods continue to dominate Namibia's import bill of which over 50% is from South Africa. We observed slow growth in South Africa' food inflation data and this will feed through to Namibia in coming months. We reiterate our expectation for inflation to average at 5,4% in 2018," said Simonis on Thursday.

On a monthly basis, inflation picked up in most categories with an exception of the transport category which increased at a slower pace of 0,6% in January 2018 compared to 0,8% in the prior month.

With reference to the annual increase, most inflation categories moderated in January 2018 with an exception of health, education and transport which increased by 6,2%, 10% and 6,3% compared to 5,6%, 8,2% and 5,2%, respectively, in the prior year.

"The increase in petrol prices at the end of 2017 is just being realised in transport inflation. We believe that the global increase in fuel prices will be offset by the stronger USDZAR (Currently at R11,60)".

"The deflation coupled with slow PSCE and sluggish economic growth puts pressure on sales revenue clothing retailers and we noted that some are selling stock at lower than cost price.

The increase in utility prices (specifically electricity) also adds to the pressure faced by clothing retailers," said Simonis.

PSG Namibia on Friday said higher crude oil prices also pose an upside risk to the inflation outlook.

"Having said that, the Namibia dollar has appreciated significantly since December 2017, in great part thanks to market-favourite Cyril Ramaphosa's election as president of the ruling African National Congress and his subsequent election as president of South Africa, following Jacob Zuma's resignation as head of state on 14 February.

Whether the Namibian dollar can hold on to these gains depends on how Ramaphosa will manage to improve the Rainbow Nation's fiscal balance, provide more clarity regarding policy and clean up corruption," commented PSG.

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