The Bank of Namibia has hiked rates by 25BP (0.25%) at their August MPC meeting. The key concerns noted by the Bank were the strong growth in PSCE to households, utilised to finance “unproductive spending on luxury goods”, most of which are imported, and the pressure that these imports are putting on the country’s reserve position.
We view this move as positive from the perspective of the Namibian macro-economy (albeit bad for the individual consumer), and have been calling for higher rates for some time – In our January outlook, we noted – “In light of expectations of a weakening external position for Namibia, we believe that 2014 may see BON taking the lead by making interest rate moves before South Africa. While this would be a first for the Bank, given our growth and inflation projections, as well as expectations of strong expansion in private sector credit extension, a weak balance of payments, plummeting reserves and high household indebtedness, we believe that economic conditions in Namibia are likely to be substantially different from those in South Africa, and that should a hike appear imminent in South Africa, that BON may act first by tightening rates” This view now appears to be playing out.
The full MPC statement can be seen below: