Category Archives: Inflation

The Namibian annual inflation rate increased marginally to 2.4% y/y in December, following the 2.2% y/y increase in prices recorded in November. Prices in the overall NCPI basket remained steady on a month-on-month basis, an indication of the subdued inflationary pressure currently being experienced. The annual average inflation rate for 2020 was 2.2%, compared to 3.7% in 2019 and 4.3% in 2018. On a year-on-year basis, overall prices in five of the twelve basket categories rose at a quicker rate in December than in November, with four categories recording slower rates of inflation and three categories recorded consistent with the prior month. Prices for goods increased by 3.5% y/y while prices for services increased by 0.9% y/y.

As it has been the case for the majority of the year, the food & non-alcoholic beverages category was the largest contributor to annual inflation in December, accounting for 1.3 percentage points of the total 2.4% annual inflation rate. Price inflation for this category came in at 0.1% m/m and 7.6% y/y, the highest annual figure since February 2017. Prices in all thirteen sub-categories recorded increases on an annual basis with the largest being observed in the prices of fruits which increased by 17.7% y/y and oils and fats which increased by 12.2% y/y.

The alcoholic beverages and tobacco basket item, the third-largest basket item by weighting, was the second-largest contributor to the annual inflation rate in December. The category displayed a price decrease of 0.4% m/m, but an increase of 4.3% y/y. Prices for alcoholic beverages decreased at a rate of 0.5% m/m, but rose 3.2% y/y, while tobacco prices fell by 0.2% m/m, but increased 9.3% y/y.

The education basket recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6% y/y, while the primary and secondary education recorded price increases of 9.3% y/y. Tertiary education prices rose by 5.3% y/y. All three subcategories printed no price increases on a month-on-month basis.

The Namibian annual inflation rate trended lower than that of neighbouring South Africa’s during the entire year. Inflationary pressure in Namibia has been particularly low since the outbreak of Covid-19 due to a lack of demand for both goods and services. The almost persistent inclusion of the education basket item, which has the 8^th highest weighting, in the top contributors to inflation in 2020 is an indication of how subdued the inflationary pressure is. IJG’s inflation model forecasts an average inflation rate of 3.2% y/y in 2021 and 4.5% in 2022, thus indicating a steady increase in the inflation rate over the next two years. The largest upside risk to this forecast is higher food costs and fuel prices.

The Namibian annual inflation rate moderated slightly to 2.2% y/y in November, following the 2.3% y/y increase in prices recorded in October. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressure remains subdued. Overall, prices in five of the twelve basket categories rose at a faster annual rate than in October, while four categories recorded slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 3.3% y/y while prices for services increased by 0.8% y/y.

As it has been the case since April this year, food & non-alcoholic beverages were the largest contributors to annual inflation in November, accounting for 1.2 percentage points of the total 2.2% annual inflation rate. Prices in this category rose 0.3% m/m and 6.9% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis with the largest increases being observed in the prices of fruits which increased by 16.1% y/y and vegetables which increased by 11.5% y/y. Price increases in oils and fats, and meat products quickened to 11.4% y/y and 10.8% y/y respectively.

Alcoholic beverages and tobacco, the third-largest basket item by weighting, was the second-largest contributor to the annual inflation rate in November, contributing 0.6 percentage points to the total 2.2% annual inflation rate.  The basket item recorded a price increase of 0.2% m/m and 4.6% y/y during the month. Prices for alcoholic beverages increased at a rate of 0.1% m/m and 3.6% y/y, while tobacco prices rose by 0.5% m/m and 9.2% y/y.

The education basket, the basket item with the eighth largest weighting (at only 3.6% of the CPI basket), was the third-largest contributor to the annual inflation rate. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3% y/y. None of the three subcategories printed price increases on a month-on-month basis.

As expected, inflationary pressure in Namibia remains extremely subdued and the Namibian inflation rate continues to trend lower than neighbouring South Africa’s October figure (latest available release) of 3.3%. IJG’s inflation model forecasts an average inflation rate of 2.2% y/y in 2020 and 3.2% y/y in 2021. Global oil prices remain one of the larger risks to our inflation forecast. However, the announcement by the Ministry of Mines and Energy at the beginning of December to cut the petrol and diesel prices by 30 cents and 20 cents per litre respectively, means that the lower transport inflation will likely lead to an even lower inflation print for December. It is also unlikely that we will see lower rental prices in the next 12 months as many consumers remain under financial pressure. With these being the larger categories of the inflation basket, we do not foresee any sudden increases in Namibian inflation in the short-term.

The Namibian annual inflation rate remained relatively steady at 2.3% y/y in October, following the 2.4% y/y uptick in prices in September. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressure remains muted. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in October than in September, while four categories recorded slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 3.3% y/y while prices for services rose by 0.9% y/y.

As in September, food & non-alcoholic beverages were the largest contributors to annual inflation in October, accounting for 1.3 percentage points of the total 2.3% annual inflation rate. Prices in this category rose 0.7% m/m and 7.1% y/y, the highest level since March 2017. Prices in all thirteen sub-categories recorded increases on a year-on-year basis with the largest increases being observed in the prices of fruits which increased by 16.1% y/y and vegetables which increased by 14.1% y/y. Price increases in meat products and fish also remained elevated at 9.3% y/y and 8.5% y/y respectively. The prospects for the Southern African region to receive normal to above-normal rainfall for the 2020-21 cropping season are currently high as La Niña conditions is expected to be sustained until at least February 2021. Should this materialise, food inflation should slow down.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in October. The basket item recorded a price increase of 1.4% m/m and 4.3% y/y during the month. Prices for alcoholic beverages increased at a rate of 1.0% m/m and 3.4% y/y, while tobacco prices rose by 3.2% m/m and 8.4% y/y.

The education basket recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6%. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3% y/y. None of the three subcategories printed price increases on a month-on-month basis. The fact that the basket item with the eighth largest weighting (at 3.6% of the CPI basket) is one of the largest contributors of the annual inflation rate is an indication of just how low inflationary pressure is at the moment.

We believe that inflationary pressure will remain relatively contained at around current levels in the short-term. IJG’s inflation model forecasts an average inflation rate of 2.2% y/y in 2020 and 3.4% y/y in 2021. One of the larger risks to our inflation forecast is global oil prices. While there has been an uptick in oil prices in recent weeks, it is improbable that it would return to levels seen at the beginning of the year anytime soon as the global demand for oil remains muted, especially since several European countries are implementing renewed lockdown measures. The likelihood of higher rental prices in the next 12 months also remains low, given the financial pressure many consumers are under. With these being the larger categories of the inflation basket, we do not foresee any sudden increases in Namibian inflation in the short-term.