CHAMWE KAIRA
Namibia’s inflation is expected to moderate during the second half of 2026 following a decline in domestic fuel prices, although economists caution that electricity tariffs, administered price increases and food costs remain significant upside risks, Almandro Jansen of Simonis Storm Securities has said.
The annual inflation rate of 4.4% recorded in June is likely to represent the peak, or close to the peak, of the country’s recent fuel-driven inflation cycle, Jansen said.
The outlook notes that the fuel price reductions implemented in July are expected to provide immediate relief to consumer prices. Petrol prices were reduced by N$1 per litre to N$22.48, while diesel prices fell by N$4 per litre to N$24.26 per litre. These reductions are expected to lower the July Consumer Price Index (CPI) by between 0.3 and 0.5 percentage points.
Simonis believes that if Brent crude oil prices remain within the US$72 to US$78 per barrel range, supported by improved geopolitical conditions following the US-Iran peace agreement and the reopening of the Strait of Hormuz, transport-related inflation could continue easing throughout the third quarter of 2026.
The report says the reopening of the Strait of Hormuz, through which about one-fifth of global oil supplies pass, has reduced the geopolitical risk premium that previously pushed crude oil prices above US$100 per barrel during April and May.
However, it cautions that renewed tensions in the Middle East or a collapse of the peace process could quickly reverse these gains.
On monetary policy, the report notes that the Bank of Namibia’s decision to raise the repo rate by 25 basis points to 6.75% in June is expected to help contain domestic demand and provide support against possible depreciation of the Namibian dollar through its peg to the South African rand.
The outlook identifies NamPower’s pending electricity tariff application as the most significant domestic inflation risk for the remainder of the year.
Should the Electricity Control Board approve a substantial tariff increase during the second half of 2026, housing and utility costs, which already contributed 1.1 percentage points to the June headline inflation rate—could accelerate further.
Municipal tariff increases are also expected to add to inflationary pressures, with Swakopmund having already approved a 5% tariff increase for the 2026/27 financial year.
Food inflation is expected to strengthen during the third quarter as higher diesel costs experienced earlier this year filter through the transport, logistics and food distribution chain.
The report projects food inflation to rise to between 3% and 3.5%, with processed foods, bread and dairy products expected to experience the greatest price pressures.
Under its base-case scenario, the report forecasts average annual inflation of between 4.5% and 5% in 2026.
It expects inflation to ease to between 3.8% and 4.1% in July, moderate further to between 3.5% and 4% during August and September, and decline to between 3.2% and 3.8% in the fourth quarter as favourable base effects emerge.
However, the report outlines an upside scenario in which inflation averages between 5% and 5.5% if NamPower’s tariff application is approved at a significant level, Brent crude oil prices rise above US$90 per barrel and the rand weakens substantially.
It estimates that each of these factors could individually add between 0.3 and 0.6 percentage points to inflation.
