The Namibian annual inflation rate ticked up to 2.7% y/y in January, following the 2.4% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased by 0.9% m/m. On a year-on-year basis, overall prices in nine of the twelve basket categories rose at a quicker rate in January than in December, while the other three recorded slower rates of inflation. Prices for goods increased by 3.2% y/y while prices for services increased by 2.0% y/y.
Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.9 percentage points of the total inflation figure. Food and non-alcoholic beverage prices increased by 5.2% y/y, moderating from the 7.6% y/y recorded in December. Prices in twelve of the thirteen sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 13.6% y/y and vegetables which increased by 12.4% y/y. The fish sub-category meanwhile saw a marginal price decrease of 0.3% y/y in January.
Alcoholic beverages and tobacco prices, making up approximately 12.6% of the overall inflation basket, was the second highest contributor to the annual inflation rate in January, with prices of the basket item increasing by 0.8% m/m and 5.0% y/y. The main driver in this basket category was tobacco prices which increased by 10.3% y/y while alcohol prices rose by 3.8% y/y.
The miscellaneous goods & services basket recorded inflation of 6.7% m/m and 6.5% y/y, and contributed 0.35 percentage points to the overall annual inflation figure. The financial services sub-category recorded a rather hefty price increase of 27.2% m/m and 24.0% y/y. The four other subcategories (personal care, personal effects, insurance and other services) all recorded quicker inflation on a month-on-month basis but recorded slower inflation on a year-on-year basis.
Despite the second consecutive uptick, the Namibian annual inflation rate continues to trend lower than that of neighbouring South Africa’s inflation rate. According to the NSA, the prices for the rental payments for dwellings sub-category rose by only 0.6% 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 2021 is likely to remain well below Namibia’s long-run average. IJG’s inflation model forecasts an average inflation rate of 2.9% y/y in 2021 and 4.3% in 2022, indicating a steady increase in the inflation rate over the next two years. We remain of the view that the largest upside risk to this forecast is higher food costs and fuel prices.
