As from today, central banks of three members of the Common Monetary Area - South Africa, Eswathini and Lesotho reduce their repo rates to below 4%, but Namibia remains at 4%.
This comes after Eswatini cut the rate from 4% to 3,75% over the weekend. South Africa also dropped from 3,75% to 3,5% last Thursday, while Lesotho was already at 3,75% in May.
The motivations to cut have one thing in common, which is to counter a coronavirus linked downturn in the group of four southern African economies.
While this might make investing in Namibia worthwhile for a while due to higher interest rates, it is expected that Namibia too will cut its rate during the next meeting to normalise the flow of capital between the monetary areas as prescribed in the agreement.
The four countries have all projected economic contractions for 2020, all because of Covid-19 and its corrosive effect on economic activities.
Eswathini expects its economy to contract by 6,7%, South Africa updated its numbers last week and now expects a 7,3% contraction from a previously announced 7%.
The Bank of Namibia estimates the Namibian economy would contract by 6,9% this year while Lesotho expects a 5,7% slowdown in economic activities.
Forecasts from the International Monetary Fund show that the global gross domestic product will contract by about 4,9% this year. Inflation in all these economies remain subdued hovering at 4% and less.
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