The Namibian inflation rate slowed to 5.4% y/y in May from 5.6% y/y in April. Prices in the overall NCPI basket rose by 0.1 % m/m, slower than the 1.4% m/m increase recorded in April. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a faster rate in May than in April, with five categories recording slower rates of inflation and three categories recording prices consistent with April. Prices for goods increased by 7.1% y/y while prices for services increased by 3.1% y/y in May.
Transport continues to be the largest contributor to the annual inflation rate, contributing 2.4 percentage points to the total 5.4% y/y inflation rate in May. Overall, prices in the transport category declined by 1.2% m/m, but rose 16.7% y/y. The three sub-categories in the transport basket item all recorded slower inflation on both a monthly and annual basis in May, except for the public transport services category which recorded steady inflation on an annual basis. The slower inflation follows the Ministry of Mines and Energy’s decision at the beginning of May to temporarily reduce the levies imposed on fuel products for a period of three months and to decrease the petrol price by 120 cents per litre and the diesel price by 30 cents per litre in May. According to the Namibian Statistics Agency (NSA) data, prices of public transport services rose by 9.8% y/y in May, unchanged from April. Prices of operating personal transport equipment declined by 2.1% m/m but rose by 24.4% y/y, while the prices of purchasing vehicles rose 0.5% m/m and 3.5% y/y in May. The Ministry of Mines and Energy’s decision to increase fuel prices again in June negates the fuel levy relief granted and will result in even higher fuel prices in August should the reduction in fuel levies not be extended beyond July.
The food & non-alcoholic beverages basket item was the second biggest contributor to the annual inflation rate in May, contributing 1.2 percentage points. Prices in this basket item rose by 1.5% m/m and 6.6% y/y in May. All thirteen sub-categories in this basket recorded price increases on an annual basis, as has been the case since January this year. The largest increase was again recorded in the prices of oils and fats which rose by 27.4% y/y, followed by fruit, which saw price increases of 16.5% y/y. The prices of bread and cereals rose by 7.6% y/y, milk, cheese, and eggs by 5.4% y/y, vegetables by 3.9% y/y, and meat by 3.4% y/y in May.
The alcohol & tobacco basket item, the third-largest contributor to the annual inflation rate, recorded higher inflation at 4.7% y/y in May, compared to the 4.5% y/y observed in April. On a monthly basis, prices in the basket item remained steady. The prices of tobacco products rose by 0.1% m/m and 6.3% y/y, while the prices of alcoholic beverages declined by 0.1% m/m but rose 4.3% y/y in May.
Namibia’s annual inflation rate of 5.4% in May was slightly slower than the rate recorded last month and was mainly the result of relatively lower fuel costs in May. The Inflation rate for petrol and diesel slowed from 47.7% y/y in April to 42% y/y in May. Despite this decline, rising food and transport prices remain the primary drivers of the Namibian inflation rate, with the two categories alone contributing over two-thirds to the country’s annual rate in May. The persistent inflationary pressures, and the SARB’s MPC decision to hike rates in May, necessitated the Bank of Namibia’s MPC to also raise interest rates by 50 basis points in June. The MPC noted in its announcement that it will continue to monitor developments in inflation to ensure price stability in the interest of the sustainable economic development of the country. IJG’s inflation model currently forecasts inflation to average between 5.0% and 6.2% in 2022.
