Category Archives: Inflation

Namibia’s annual inflation rate ticked up to 4.6% y/y in January, following the 4.5% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased by 1.1% m/m. On a year-on-year basis, overall prices in eight of the twelve basket categories rose at a quicker rate in January than in December, while the other four recorded slower rates of inflation. Prices for goods increased by 5.8% y/y while prices for services increased by 3.0% y/y.

Transport was once again the largest contributor to the annual inflation figure, contributing 1.9 percentage points to the total 4.6% y/y inflation rate. Prices in this category remained steady month-on-month, following the Ministry of Mines and Energy’s decision to leave fuel pump prices unchanged in January, but increased by 13.5% y/y. The purchase of vehicles sub-category recorded somewhat slower inflation at 3.9% y/y while the prices of public transportation services rose by 9.7% y/y. The operation of personal transport equipment recorded a rise in prices of 19.0% y/y.

Rising tensions between Russia and Ukraine has put markets on high alert for possible disruptions of Russian energy supplies. Coupled with a rebound in the global economy from the pandemic, has resulted in oil prices now trading at 2014 highs. A lack of production capacity and limited investment in the sector will likely result in fuel prices remaining elevated for the majority of 2022. The Ministry’s decision to increase fuel prices by 30 cents- and 40 cents per litre for petrol and diesel, respectively, in February will keep the transport basket item’s inflation rate elevated going forward.

Food & non-alcoholic beverages, the second largest basket item by weighting, contributed 0.9 percentage points to the annual inflation rate in January. Prices in this basket item rose by 0.4% m/m and 5.6% y/y. All 13 sub-categories recorded price increases on an annual basis. The biggest increases were recorded in the prices of fruits which rose by 12.8%, followed closely by the prices of oils and fats, increasing by 12.7%, and meat at 10.6% y/y.

Alcohol & tobacco inflation ticked up from 3.8% y/y in December to 3.9% y/y in January. On a monthly basis, prices in this basket item rose by 0.9%. The alcoholic beverages sub-category recorded a price increase of 1.1% m/m and 3.5% y/y. Tobacco prices were up 0.3% m/m and 5.7% y/y.

Despite January’s inflation print ticking up for a fifth consecutive month, the differential between Namibia and South Africa’s inflation rates remain steady at around 1.4 percentage points, as the chart above indicates. According to the NSA, the prices for the rental payments for dwellings subcategory rose by 1.4% y/y in January. As rental payments make up a large portion (23.3%) of the CPI basket, the low inflationary adjustment means that Namibian annual inflation in 2022 is likely to remain relatively contained. IJG’s inflation model currently forecasts an average inflation rate of 4.2% y/y in 2022, with risks tilted to the upside, particularly stemming from higher food costs and elevated fuel prices. 

Following the SARB’s MPC decision to increase rates by 25 bps last month, we expect the BoN to follow suit at their February MPC meeting after the buffer that has been in place since the start of the pandemic was closed in November.

Namibia’s annual inflation rate rose to 4.5% y/y in December, with prices in the overall NCPI basket increasing by 0.4% m/m. The annual average inflation rate for 2021 was 3.6%, compared to 2.2% in 2020 and 3.7% in 2019. Year-on-year, overall prices in three of the twelve categories rose at a quicker rate in December than in November, six categories experienced disinflation and three categories posted steady inflation. Prices for services rose by 2.7% y/y and prices for goods rose by 5.8% y/y.

Transport continues to be the largest contributor to annual inflation, with prices in this category increasing by 2.1% m/m and 14.3% y/y. This basket item contributed 2.0 percentage points to the annual inflation rate in December. Prices in two of the three sub-categories recorded price increases, with the “operation of personal transport equipment” increasing by 19.7% y/y. This is mostly attributable to a 36.1% y/y increase in the price of petrol and diesel. This was the largest year-on-year increase in fuel prices for 2021. Current forecasts are that global oil prices will continue to increase this year with some analysts predicting that a lack of production capacity and limited investment in the sector will result in demand outstripping supply. We thus expect fuel prices to remain elevated for the majority of 2022.

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in December, contributing 0.9 percentage points. Prices in this basket item remained steady on a monthly basis but increased by 5.1% y/y. Only one sub-category, vegetables, recorded a decrease in prices on an annual basis of 1.1%. The twelve other sub-categories all recorded price increases on an annual basis. Fruit prices increased by 14.9% y/y, oils and fats by 11.9% y/y and meat prices by 11.8%.

Alcohol & Tobacco inflation accelerated from 2.8% y/y in November to 3.8% y/y in December and was the third-largest contributor to December’s annual inflation rate. The prices of tobacco products rose by 0.8% m/m and 6.2% y/y, while the prices of alcoholic beverages increased by 0.4% m/m and 3.2% y/y.

The 4.5% y/y annual inflation rate for December was in line with IJG’s average inflation forecast of 4.3% y/y for the month. IJG’s inflation model forecasts an average inflation rate of 4.3% y/y in 2022 and 3.5% in 2023. Following the SARB’s 25 basis point hike last year, South Africa’s inflation rate accelerated to 5.5% y/y in November, uncomfortably close to the SARB’s upper bound of 6.0% y/y. The MPC committee will meet again on 27 January, which will set the stage for the BoN’s next meeting scheduled for 16 February. We expect the BoN to follow suit on any rate decisions made by the SARB.

Namibia’s annual inflation rate rose to 4.1% y/y in November, with prices in the overall NCPI basket increasing by 0.6% m/m. Year-on-year, overall prices in eight of the twelve categories rose at a quicker rate in November than in October, two categories experienced slower rates of inflation and two categories posted steady inflation. Prices for services rose by 2.4% y/y and prices for goods rose by 5.4% y/y.

Transport was the largest contributor to annual inflation in November, with prices in this category increasing by 1.5% m/m and 11.9% y/y. This basket item contributed 1.6 percentage points to the annual inflation rate in November. Prices in all three sub-categories recorded price increases, with the sharpest increase coming in “operation of personal transport equipment”. This is due mostly to a 27.4% y/y increase in the price of petrol and diesel. This is the largest year-on-year price increase in fuel seen so far this year. As was the case last month, this increase is explained by both base effects and an ongoing shortage in global oil supply.

Predictably, food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in October, contributing 1.0 percentage points.  Prices in this basket item increased by 0.3% m/m and 5.2% y/y. On a yearly basis all sub-categories, except for vegetables & tubers, registered price increases. Namibia’s continued reliance on South Africa for food imports means than whenever transport costs rise it is all but inevitable that the price of food will rise accordingly.

Inflation rates in the remainder of the categories were relatively subdued. Alcohol & Tobacco was the third largest contributor to November’s annual inflation rate, with prices increasing by 2.0% m/m and 2.8% y/y. The prices of alcoholic beverages, the more heavily weighted of the two sub-categories in this basket, increased by 2.3% y/y while the price of tobacco products, the other sub-category, increased by 5.2% y/y in November.

The 4.1% y/y annual inflation rate for November came in above IJG’s average inflation forecast for the month. IJG’s last estimate was that inflation would rise to 3.8% y/y in November. A hawkish shift in the Fed’s tone has led to debate as to whether the US central bank will taper asset purchases at a faster rate than it had previously indicated. This, as well as a 25bps SARB rate hike in late November, lends credence to the argument that inflation risks both globally, and in southern Africa, remain to the upside. In our previous report our inflation model forecast average annual inflation for 2022 at 3.9% y/y. A spike in Namibia’s CPI and a deterioration in the rand has pushed that estimate up to 4.2% y/y. The estimated upper bound for average annual inflation in Namibia for 2022 is now 5.2% y/y.