Business Reporter
THE Bank of Namibia’s Monetary Policy Committee (MPC) has announced that the repo rate will remain unchanged at 7.75%.
The maintenance of the repo rate at its current level comes at a time when economic analysts expected the repo rate to be reduced by 0.25 basis points on the 14 February 2024 as inflation slows.
A change in the repo rate will affect people who have borrowed any form of a loan from the commercial banks such as personal loans, home loans or car loans. This is because it is linked to the prime interest rate, which is the interest rate used by the banks to calculate the loan repayment for customers who are borrowing.
Explaining the reasons behind the monetary policy decision, Johannes !Gawaxab, governor of the Central Bank of Namibia said that Most monitored central banks kept their policy rates unchanged at their most recent monetary policy meetings, mainly due to easing inflation and the moderation in growth. Notwithstanding, the Bank of Russia and the Central Bank of Brazil raised and cut rates, respectively, in December 2023. With inflation likely to recede slightly faster than previously expected in most jurisdictions, global central banks are expected to deliver a smooth landing, by neither lowering rates prematurely nor postponing such reductions for too long.
“Against this background, the MPC decided to keep the Repo rate unchanged at 7.75%. As such, the prime lending rate remains steady at 11.50 percent. The MPC noted the continued disinflation both globally and domestically. With real interest rates remaining positive, and slow credit growth, amid a fair level of international reserves, the MPC decided to maintain the Repo rate at its current level. This policy stance will continue to safeguard the one-to-one link between the Namibia Dollar and the South African Rand and support domestic economic activity,” !Gawaxab said.
He added that the Domestic economic activity expanded during 2023, as reflected in sectors such as mining, electricity generation, livestock farming, wholesale and retail trade, tourism, communication and transport. Meanwhile, activity in the construction sector remained weak. “Going forward, GDP growth is projected to decelerate from a revised 6.4 % in 2022 to 3.9% in 2023 and further down to 3.4 % in 2024. The downward trajectory in growth is characterised by the expected slower growth in the primary and secondary industries, in part due to uncertain weather conditions,” !Gawaxab said.
The central bank’s governor added that the downside risks to the domestic economic outlook remained broadly unchanged since the previous MPC meeting, mainly reflecting global factors. Such external factors include slow global economic growth, tight global monetary policy, geopolitical tensions, geoeconomic fragmentation and unstable electricity supply and logistical constraints in South Africa. Internally, adverse risks include drought, sporadic rainfall conditions as well as water supply interruptions, particularly at the coastal towns.
Annual inflation moderated to 5.9% in 2023 from 6.1 % in 2022, mainly owing to a deceleration in the transport category. Likewise, inflation slowed since the previous MPC meeting from 6.0 % in October 2023 to 5.4 % in January 2024. Inflationary pressures are expected to continue receding with consumer price inflation projected to average 4.8 % in 2024, unchanged compared to the previous forecast.
Since the last MPC meeting, annual growth in Private Sector Credit Extension (PSCE) remained weak despite edging slightly upwards to 1.9 % in December 2023 from 1.8% in October 2023. The slight improvement in PSCE growth was characterised by a higher credit uptake by the corporate sector in the form of instalment sale and leasing finance. On average, growth in PSCE slowed from 3.6% in 2022 to 2.4 % in 2023 and is projected to improve marginally to 2.8% in 2024.
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