According to the latest Consumer Price Index by the Namibia Statistics Agency, the Namibian annual inflation rate increased slightly to 2.5% in February, following the 2.1% increase in prices recorded in January.
Food and non-alcoholic beverages prices increased by 1% monthly and 2.8% yearly in February, ticking up from inflation of 2.2% y/y recorded in January. Despite this relatively subdued rate of inflation, food and non-alcoholic beverages prices made up the second largest portion of annual inflation.
The largest increases were observed in the prices of fruits which increased by 15% and fish which increased by 8.2%.
Researchers from IJG Research forecast muted inflation in the above prices after most parts of the country received good rainfall during February which is likely to have a positive impact on local food production.
Meanwhile, alcoholic beverages and tobacco prices was the third largest contributor to the annual inflation rate in February, with prices in the basket increasing by 0.4% monthly and 2.7% yearly.
The zonal data shows that on a monthly basis, prices declined by 0.1% in the northern area while rising elsewhere in the country. On an annual basis the Windhoek and surrounding area recorded the lowest inflation rate at 2.1% yearly in July, with the northern region recording the highest rate of annual inflation at 2.8% yearly. Inflation in Eastern, Southern and Western regions remained unchanged at 2.5%.
IJG further noted that while the Namibian annual inflation print for February at 2.5% has ticked up from the 2.1% figure recorded in January, inflation remains at historically low levels.
IJG said with low inflationary pressure due to adequate rainfall in most parts of the country, an oil-price war and a lack of domestic demand, they expect inflation to remain subdued in the coming months.
"IJG's inflation model forecasts an average inflation rate of 2.8% in 2020. This lower expected inflation and low economic growth forecasts means that there is still some leeway for both the South African Reserve Bank and the Bank of Namibia to cut repo rates at their next Monetary Policy Committee meetings," IJG added.
Shelly Louw, Research Analyst at PSG Namibia said the average inflation rate is expected to remain subdued in 2020 due to the anchor of low rental inflation, lower oil prices and dismal domestic demand, while pass through from the weaker exchange rate and food price pressures is expected to be limited.
She noted despite acute currency weakness in 2019, pass through has been limited with retailers unable to pass on higher costs in the recession hit trading environment.
"The outlook for both South African maize and global wheat production in 2020 is positive, which means Namibia's bread cereal price inflation should be under control. Moreover, housing utilities price inflation has been subdued, as house and rental prices have fallen following several years of soaring growth," Louw said.