Category Archives: Inflation

The Namibian annual inflation rate remained at 4.5% y/y in April, unchanged from March. On a month-on-month basis, prices increased by 0.4%, following the 0.2% m/m increase in March. Overall, prices in six of the basket categories rose at a faster annual rate than during the preceding month, five at a slower rate and one grew at a steady pace. Prices for goods rose by 4.4% y/y in April, while prices for services grew by 4.7%.

The alcoholic beverages and tobacco category displayed price increases of 1.6% m/m and 7.5% y/y in April, making it the largest contributor to annual inflation, accounting for 1.0% of the 4.5% annual inflation rate. The main driver in this basket category was alcohol prices which increased by 1.7% m/m and 7.6% y/y. Tobacco prices meanwhile increased at a rate of 0.8% m/m and 7.2% y/y. The relatively large increase in the prices of the alcoholic beverages and tobacco basket category can likely be explained by sin taxes that were announced during the budget speech in March, as well as second round effects stemming from the series of fuel price increases announced towards the end of 2018.

Transport, the third largest basket item, was the second largest contributor to annual inflation, accounting for 1.0% of the total 4.5% annual inflation figure. Transport costs increased by 0.7% m/m and 7.1% y/y. The purchase of vehicles subcategory saw price increases of 1.6% m/m and 4.6% y/y, while the operation of personal transport equipment subcategory recorded price increases of 0.6% m/m and 4.7% y/y. Brent Crude oil prices increased by about 6.5% during April, reaching US$73 per barrel at the end of the month. The Ministry of Mines and Energy once again announced that the government would finance the under-recoveries recorded during April, and subsequently kept fuel pump prices unchanged for the month.

Prices for the food & non-alcoholic beverages category was the third highest contributor to the annual inflation rate in April. Prices in this category fell by 0.2% m/m, but rose by 5.3% 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 vegetables, fruits and bread and cereals. We expect food price inflation to remain under upward pressure for the rest of the year, as poor rainfall during Namibia’s rainy season affects local food production.

The Namibia Statistics Agency (NSA) for the first time released regional CPI data for Namibia, grouping the country into three zones, based on the then Central Bureau of Statistics’ (CBS) 2005 grouping. Zone 1 consists of regions in the northern part of the country, namely Kavango East, Kavango West, Kunene, Ohangwena, Omusati, Oshana, Oshikoto, Otjozondjupa and Zambezi. Zone 2 covers the Khomas region and Zone 3 covers the remaining //Karas, Erongo, Hardap, and Omaheke regions. The zonal data shows that Zone 2 (Windhoek) has the highest annual inflation at 5.0% y/y, Zone 3 (East, South and West) the second highest at 4.8% y/y and Zone 1 (North) in third place with an annual inflation rate of 3.8%.

The Namibian annual inflation rate of 4.5% y/y continues to trend marginally higher than that of neighbouring South Africa’s 4.4% y/y. The South African Reserve Bank’s Monetary Policy Committee (MPC) yesterday announced their decision to leave the Repo rate unchanged. The SARB’s MPC lowered its forecast for core inflation from 4.8% to 4.5% in 2019. The probability of the SARB cutting rates has been increasing lately as a result of subdued inflation pressure and low growth forecasts, but these will likely need to be even lower to sway the MPC to cut rates. We expect the Bank of Namibia to follow the SARB’s decision at its next MPC meeting in June. IJG’s inflation model forecasts average inflation of 4.3% in 2019. The largest upside risk to this forecast, however, is higher transport and food costs.

The Namibian annual inflation rate edged up to 4.5% y/y in March, after moderating to 4.4% y/y in February. Prices in the overall NCPI basket increased by 0.2% on a monthly basis in March, following deflation of 0.1% m/m in February.  On an annual basis, prices in five of the twelve basket categories rose at a quicker rate in March than in February. One category remained unchanged, while the rate of price increases in six categories slowed for the month of March. Prices for goods increased at a rate of 4.4% y/y in March, while prices for services increased by 4.6% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.0% of the 4.5% annual inflation rate. Prices in this category were unchanged on a month-on-month basis, but rose by 5.8% 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 vegetables, fruits and bread and cereals. The increase on an annual basis, is likely a result of increased transport prices towards the end of last year which has filtered through to food prices, coupled with poor rainfall during Namibia’s rainy season that affects local food production.

Transport, the third largest basket item, was the second largest contributor to annual inflation, accounting for 0.9% of the total 4.5% annual inflation figure. Transport prices fell by 0.3% m/m in March, but increased by 6.9% y/y. The purchase of vehicles subcategory saw price decreases of 0.8% m/m, but an increase of 4.2% y/y. Oil prices have steadily been picking up since the beginning of the year, reaching US$68 per barrel at the end of March. The Ministry of Mines and Energy once again decided to keep fuel pump prices unchanged for the month, stating that the government will finance the under-recoveries.

The alcoholic beverages and tobacco category recorded price increases of 0.9% m/m and 6.7% y/y, an increase over the figures seen in the prior month. Prices of alcoholic beverages increased at a rate of 6.9% y/y, while tobacco prices increased at a rate of 6.3% y/y.

The Namibian annual inflation rate of 4.5% y/y continues to trend somewhat higher than that of neighbouring South Africa (February: 4.1% y/y). The poor rainfall Namibia experienced during the rainy season affects local food production and will likely lead to higher food inflation going forward, as the shortfall will lead to an increase imports. Oil prices have also been climbing steadily since the beginning of the year, and while the government has managed to finance the under-recoveries up until now, we expect fuel prices to increase at some point in the coming months.

The Bank of Namibia (BoN) has decided to maintain the Repo rate at 6.75% at its MPC meeting last week, following a review of global, regional and domestic economic and financial developments. The BoN expects inflation to average 4.7% in 2019. IJG’s inflation model forecasts average inflation of 4.3% in 2019. However, oil prices and subsequent transport inflation poses the largest upside risk to this forecast.

The Namibian annual inflation rate moderated slightly to 4.4% y/y in February, following the 4.7% y/y increase in prices recorded in January. Prices in the overall NCPI basket decreased 0.1% m/m. On a year-on-year basis, overall prices in seven of the twelve basket categories rose at a quicker rate in February, while four categories recorded slower rates of inflation and one category posted steady inflation. Prices for goods increased by 4.3% y/y while prices for services increased by 4.6% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, was once again the largest contributor to annual inflation, accounting for 1.0% of the 4.4% annual inflation rate. The basket category recorded price increases of 0.4% m/m and 5.9% y/y in February, versus the 1.7% m/m and 5.7% y/y increases recorded in January. Prices in all thirteen sub-categories recorded increases on a year-on-year basis with the largest increases being observed in the prices of vegetables, fruits, and bread and cereals.

Transport, the third largest basket item, was the second largest contributor to annual inflation. Prices for transport rose by 7.5% y/y in February, marginally faster than the increase of 7.3% y/y recorded in January. The purchase of vehicles subcategory saw price increases of 0.9% m/m and 5.0% y/y. The cost of operation of personal transport equipment recorded an increase of 5.2% y/y. Oil prices increased by 6.4% in February, reaching US$57 a barrel at the end of the month as OPEC cut its output to a nearly four-year low, according to a survey by S&P Global Platts. The Ministry of Mines and Energy however decided to keep fuel pump prices unchanged for the month.

Prices for the alcoholic beverages and tobacco category was the third highest contributor to the annual inflation rate in February, and increased at a rate of 0.3% m/m and 6.2% y/y. Prices of alcoholic beverages increased at a rate of 6.5% y/y while tobacco prices increased at a rate of 4.9% y/y.

The Namibian annual inflation rate of 4.4% is currently trending somewhat higher than neighbouring South Africa’s January figure (latest available release) of 4.0%. Namibia’s inflation was mainly driven by food inflation, as the second-round effects caused by increases in transport inflation towards the end of last year and poor rainfall throughout the country during the first half of the 2019 rainfall season continue to push up food inflation.

Although the Ministry of Mines and Energy decided to keep fuel pump prices unchanged for March, we expect the Ministry to start hiking prices sometime in the coming months as oil prices have been picking up steadily since the beginning of the year. Inflation expectations will further be driven by exchange rates, with the rand having weakened since the beginning of February.