15 February 2019

Namibia: Headline Inflation Reverses Trend, Down to 4.7 Percent in January

The upward trend in headline inflation went down, altogether improving the inflation outlook from a couple of months ago, particularly for the first quarter of this year, statistics released by the Bank of Namibia indicate.

The consumer price index inflation rate was recorded at 4.7% in January 2019, down from the 5.1% recorded in December 2018.

Analysts attribute this to the fall in oil prices and the stronger domestic currency seen towards the end of 2018.

PSG Wealth Management noted that global oil prices have started to recover in January 2019 on the back of renewed pledges from major oil producers to cut back on supply and the impact of economic sanctions against Venezuela.

However, the firm stressed that further inflation risks due to South Africa's energy, labour and political woes as well as higher food prices which relate to the on par pegging of the Namibia Dollar with the South African Rand.

"Maize prices have risen in recent months due to weaker production in the Southern African region," PSG added.

Klaus Schade, Research Associate at the Economic Association of Namibia added that while the drop in the inflation brings relief to consumers, not all households will benefit to the same extent from the slowdown in price increases.

"Poor households that spend most of their income on food, and a lower share than the average household on transport and rent in particular those in rural areas, will struggle more to make ends meet. Due to the existing dry spell, we expect food prices to remain under pressure. In addition, further price increases for alcoholic beverages and tobacco products can be expected this month with the annual increase in excise duties," Schade stressed.

He further added that despite the upward price pressure in some categories, inflation is expected to remain well within the 3% to 6% band targeted by the South African Reserve Bank, therefore, and given the economic climate, interest rate increases are unlikely this year.

Meanwhile, on annual basis, the 4.7% inflation figure recorded in January 2019 is 1.1% higher than the 3.6% registered in January 2018.

The central bank stated that this increase resulted mainly from increases registered in food and non-alcoholic beverage, clothing and footwear, education, furnishings, household equipment and routine maintenance of the house and Alcoholic beverages and tobacco.

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