CHAMWE KAIRA
Simonis Storm Securities expects the Bank of Namibia to keep the repo rate unchanged or will hike it by 25 basis points at its next monetary committee meeting on 16 August.
Last week, South African Reserve Bank decided to keep the repurchase rate at its current level of 8.25% per year. The Bank of Namibia on 14 June increased the repo rate by 50 basis points to 7.75 percent
“Initially we had expected the South African Reserve Bank to hike by 25 basis points, but SARB has aligned their decision with the Fed, and was further supported by lower interest rates. The likelihood that the Bank of Namibia will keep rates unchanged is high, also supported by lower inflation rates. Private sector credit for May came in at 1.5%, showing that monetary policy is becoming restrictive,” said Angelique Bock said research assistant at Simonis Storm.
Lesetja Kganyago, Governor of the South African Reserve Bank said Sub-Saharan Africa’s growth prospects remain muted.
He said the SARB’s forecast for global growth in 2023 has been revised marginally higher to 2.5 percent (from 2.4 percent), and remains unchanged at 2.7 percent in 2024.
“While South Africa’s economic conditions appear to have improved, the longer-term outlook mirrors the uncertainty of the global environment. Prices for commodity exports continue to weaken. In addition, energy supply remains unreliable and stronger El Nino conditions threaten the agricultural outlook.”
For 2023, the bank’s forecast for South Africa’s GDP growth is slightly higher than in May, at 0.4 percent (from 0.3 percent).
He said energy and logistical constraints remain binding on the growth outlook, limiting economic activity and increasing costs. The bank’s GDP growth forecast for 2024 and 2025 has unchanged from the previous meeting.
Ratings agency, Fitch Ratings said last month that it expects the BoN’s monetary policy to be consistent with the sustainability of the long-standing peg arrangement of the Namibian dollar to the South African rand.
“Inflationary pressures have built up since the first quarter of 2022, primarily driven by the depreciation of the exchange rate and elevated food and energy prices. Market sentiment towards South Africa has led to persistent depreciation pressure on the exchange rate, fueling imported inflation. We expect inflation to average 5.5 percent in 2023 before easing to 4.5 percent in 2024. The Bank of Namibia hiked its policy repo rate to 7.25 percent in April 2023, currently 100bp below the policy rate in South Africa,” said Fitch.
