Category Archives: Inflation

The Namibian annual inflation rate ticked up slightly to 2.1% in May, following the 1.6% y/y increase in prices recorded in April. Prices in the overall NCPI basket increased by 0.4% m/m. Namibian inflation thus remained at historically low levels in May. On a year-on-year basis, overall prices in eight of the twelve basket categories rose at a quicker rate in May than in April, with two categories recording slower rates of inflation and two categories recording increases consistent with the prior month. Prices for goods increased by 2.3% y/y while prices for services rose by 1.7% y/y.

The food & non-alcoholic beverages category was the largest contributor to annual inflation in May, accounting for 0.83 percentage points of the total 2.1% annual inflation rate. The category recorded price increases of 0.1% m/m and 4.7% 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, vegetables and coffee, tea and cocoa.

The miscellaneous goods & services basket item was the second largest contributor to annual inflation, accounting for 0.32 percentage points of the total 2.1% annual inflation figure. The fact that the sixth largest basket item was one of the largest contributors to the annual inflation figure in May illustrates how low inflationary pressure is at the moment. The prices of miscellaneous goods & services remained steady on a month-on-month basis, but rose 6.1% y/y. The only subcategory which showed an increase on a month-on-month basis was personal effects, which increased by 0.7% m/m. Prices in all other subcategories remained steady during the month, except for the personal care subcategory, which recorded price decreases of 0.4% m/m.

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. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3%. None of the three subcategories printed price increases on a month-on-month basis.

The NSA’s regional CPI data shows that on a monthly basis prices increased by 0.3% in the northern zone, 0.4% in the central zone, and 0.2% in the mixed eastern, southern and western zone. On an annual basis the northern region recorded the highest inflation rate at 2.3% y/y in May, while both the central zone 2 and mixed zone 3 recording inflation rates of 1.9% y/y. 

Despite a slight uptick in the inflation rate in May to 2.1% y/y, inflationary pressure remains extremely subdued. Despite the lockdown restrictions being lifted for most industries and regions, many businesses and consumers remain under severe financial pressure and are simply not able to afford higher prices for goods and services.

The low inflationary pressure does at least provide the Bank of Namibia (BoN) some leeway to follow the SARB by cutting interest rates at its June MPC meeting in an attempt to resuscitate economic growth. While this should bring some further relief to heavily indebted businesses and consumers, it is unlikely that commercial banks will be spurred on to grow their loan books as risks remain. Monetary policy alone will thus not be enough to drive meaningful economic growth, and as a result inflation is expected to remain low in the short- to medium term. IJG’s inflation model forecasts an average inflation rate of 1.9% y/y in 2020 and 3.7% y/y in 2021.

The Namibian annual inflation rate slowed to 1.6% in April, from 2.4% y/y in March. This is the lowest annual increase in inflation since June 2005. On a month-on-month basis, prices decreased by 0.3%, following the 0.1% m/m increase in March. Overall, prices in four of the basket categories rose at a faster annual rate than during the preceding, while eight rose at a slower rate. Prices for goods 2.2% y/y in April, while prices for services grew by 0.9%. 

The food & non-alcoholic beverages category displayed price increases of 1.1% m/m and 4.2% y/y in April, making it the largest contributor to annual inflation, accounting for 0.78 percentage points of the 1.6% annual inflation rate. 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, vegetables and coffee, tea and cocoa. 

The miscellaneous goods & services basket item was the second largest contributor to annual inflation, accounting for 0.3 percentage points of the total 1.6% annual inflation figure. The fact that the sixth largest basket item was one of the largest contributors to the annual inflation figure in April illustrates how low inflationary pressure is at the moment. The prices of miscellaneous goods & services rose by 0.3% m/m and 6.0% y/y in April. The only subcategories which showed increases on a month-on-month basis were personal care, which increased by 1.0% m/m, and personal effects, which increased by 0.1% m/m. Prices in all other subcategories remained steady during the month.

The education basket item recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6% y/y. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3%. None of the three subcategories printed price increases on a month-on-month basis.

Zonal data shows that, on a monthly basis, prices declined by 0.4% in the northern and central zones while falling by 0.1% in the mixed east, south and western zone. On an annual basis the Windhoek and surrounding area, in zone 2 recorded the lowest inflation rate at 0.8% y/y in April, with the northern region recording the highest rate of annual inflation at 2.1%. Inflation in zone 3 (Eastern, Southern and Western regions) slowed to 2.2% y/y.

Namibian annual inflation at 1.6% in April shows that inflationary pressure remains extremely subdued, and is currently at levels last seen in 2005. As explained last month, the lockdown imposed by the government severely hampered economic activity in April, putting both businesses and consumers under severe financial pressure which results in consumers simply not being able to afford higher prices on goods and services. While the lockdown has now been mostly lifted, we expect inflation to remain subdued in the short to medium term. IJG’s inflation model forecasts an average inflation rate of 1.9% y/y in 2020 and 3.7% y/y in 2021.

The Namibian annual inflation rate remained relatively unchanged at 2.4% y/y in March, following 2.5% y/y uptick in prices in February. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressures remain muted. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in March, while six 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 1.0% y/y. 

As in February, Transport was the largest contributor to annual inflation in March, accounting for 0.6 percentage points of the total 2.4% annual inflation rate. Transport prices fell by 0.3% m/m, but rose 4.4% y/y in March. The Ministry of Mines and Energy dropped the fuel pump price of diesel by 30 cents per litre in March, which resulted in a price drop of 0.5% m/m in the operation of personal transport equipment sub-category, and the annual increase to slow to 5.5% y/y in March from 5.9% y/y recorded in February. Given that a relatively large fuel pump price cut was announced for both petrol and diesel for April, inflationary pressure is likely to remain very low for this subcategory. Despite OPEC agreeing to cut oil production by 9.7 million barrels in May and June, oil prices are expected to remain low for the next few months as the demand for oil remains low, and oil producers are running out of storage space. The purchase of vehicles subcategory recorded price increases of 4.9% y/y, while the prices of public transport services remained steady.

Prices for the food & non-alcoholic beverages category was the second largest contributor to the annual inflation rate in March. Prices in this category rose by 0.1% m/m and 2.9% y/y. Prices in twelve of the thirteen subcategories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 16.4% y/y and vegetables which increased by 8.3% y/y. The bread and cereals subcategory recorded price decreases of 0.9% m/m and 0.7% y/y.

The education basket recorded inflation of 7.6% y/y, with the cost of pre-primary education growing at a rate of 5.6% y/y. Primary and secondary education recorded price increases of a rather hefty 23.1% y/y, while tertiary education prices fell by 2.6% y/y. None of the three subcategories printed price increases on a month-on-month basis.

The NSA’s regional CPI data shows that on a monthly basis prices declined by 0.1% in the northern zone 1 while rising by 0.1% elsewhere in the country. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the lowest inflation rate at 1.9% y/y in March, with the northern region recording the highest rate of annual inflation at 2.6% y/y. Inflation in zone 3 (Eastern, Southern and Western regions) remained unchanged at 2.5% y/y.

Namibian annual inflation remained muted in March at 2.4% compared to 2.5% in February. We expect this to remain the case for the rest of the year. Oil prices are expected to remain low for as long as factories across the world remain closed. The lockdown imposed by the Namibian government has put a number of businesses and consumers under severe financial pressure, which will result in consumers simply not being able to afford higher prices on goods and services. This will put further downward pressure on inflation as consumers will mostly direct their spending toward essential goods and services. IJG’s inflation model forecasts an average inflation rate of 2.6% y/y in 2020 and 4.3% y/y in 2021.