WINDHOEK, Jan. 16 – According to the Namibia Statistics Agency (NSA), the annual headline inflation rate as measured by the consumer price index (CPI) remained unchanged in December 2017 as a moderation in food price pressures was offset by increased housing, water and energy costs.
PSG Konsult Namibia reported that headline inflation has fallen steadily from a high of 8.2% yearly in January 2017 and has remained below 6% year-on-year for the sixth straight month, thanks to declining food inflation.
However, some upward inflationary pressure stemming from higher fuel prices is evident, but this could subside in coming months thanks to the Namibian dollar’s recent strength, which lowers the import costs of fuel.
“We still expect the average inflation rate to moderate from 6.2% in 2017 to about 5% in 2018. This moderate inflation scenario is supported by weak domestic demand and a resilient exchange rate,” PSG Konsult added.
However, PSG Konsult added that potentially higher international oil prices, the possibility of hefty municipal rate hikes in 2018 as well as the ever-present danger of a sudden sharp depreciation in the Namibian dollar (pegged on par with the South African rand), due to South Africa’s volatile political developments, pose upside risks to inflation.
“Given these significant upside risks and the uncertain global economic environment, our base case is for interest rates to remain unchanged for the time being, but should the currency remain stable at present levels there is a reasonable chance of an interest rate cut in H1 2018,” PSG Konsult added. – Ronald Geingob