Staff Writer
FNB Namibia has forecast that Namibia’s average inflation rate will moderate to 3.9% in 2026, although persistent services inflation, administered price pressures and global oil market volatility remain key upside risks.
According to FNB Namibia economist Cheryl Emvula and market research manager Mandisa Van Wyk, headline inflation increased to 4.4% year-on-year in June 2026 from 4.1% in May, while core inflation rose to 3.3% from 3.1%, indicating a gradual increase in underlying price pressures.
The economists said rising services inflation and administered prices could continue to influence the inflation outlook, while international oil market developments could add further pressure to domestic prices.
“Persistent services inflation, administered price pressures and potential global oil market volatility continue to pose upside risks,” FNB Namibia said.
The research note indicated that household credit conditions remain stable but subdued, with high living costs and elevated borrowing costs continuing to weigh on household affordability.
Households are increasingly relying on a combination of short-term and secured borrowing to meet financing needs, although credit growth is expected to remain limited in the near term.
FNB Namibia forecasts household credit growth to average around 4.1% in 2026, with stronger growth expected only once inflationary pressures ease and broader economic conditions improve.
Meanwhile, the South African Reserve Bank’s (SARB) decision to keep its repo rate unchanged at 7.0% has drawn market attention, particularly after South Africa’s inflation accelerated to 5.0% year-on-year in June and amid continued risks linked to higher oil prices and geopolitical tensions in the Middle East.
FNB Namibia said markets expect the SARB could resume monetary tightening later this year, potentially at its next or final policy meeting of 2026.
For Namibia, FNB expects the Bank of Namibia (BoN) to maintain the current interest rate level at its August 2026 meeting before implementing a 25-basis point increase in October to maintain monetary policy alignment with South Africa and support the currency peg.
“Further tightening beyond October appears unlikely unless inflationary pressures intensify materially,” the economists said.
The report also highlighted potential liquidity pressures arising from increased government domestic borrowing requirements.
The finance ministry’s decision to shift N$7.1 billion from foreign financing to the domestic market has increased the FY2026/27 domestic borrowing requirement to N$27.3 billion.
FNB Namibia said the revised August to October borrowing programme, amounting to N$10.1 billion, is expected to absorb a significant portion of market liquidity.
However, continued growth in domestic credit and resilient deposit growth are expected to provide support for money supply expansion over the short term.
