Lower petrol prices to stabilise inflation

CHAMWE KAIRA

Namibia’s inflation rate is expected to remain relatively stable, bolstered by the Ministry of Mines and Energy’s recent decision to maintain fuel prices through November, Simonis Storm has observed.

Petrol will remain at N$20.25 per litre, while diesel 50ppm and 10ppm are set at N$19.72 and N$19.82 per litre, respectively.

“By holding fuel prices steady, the ministry aims to curb inflationary pressures, particularly within the transport sector—a significant inflation driver earlier in the year. This stabilisation of fuel costs contributes to a more predictable inflationary environment, yet several underlying risks persist,” Simonis said.

Despite the positive impact of stable fuel prices, upward pressure on food prices has emerged, with food inflation rising for the second consecutive month, it noted.

Simonis said while these increases remain below last year’s peaks, the sustained pressure in this category could offset some of the disinflationary benefits from stable transport costs.

Given food’s significant weight in the Consumer Price Index basket, any further price increases could incrementally raise headline inflation, the firm added.

“Additionally, geopolitical tensions in the Middle East have recently pushed Brent crude oil prices above US$80 per barrel. This increase introduces a potential vulnerability to Namibia’s inflation outlook. If global oil supplies become constrained due to heightened geopolitical risks, the ministry’s capacity to sustain domestic fuel price stability could be compromised, posing renewed inflationary risk,” Simonis said.

On the domestic front, consumer spending is expected to experience a seasonal boost as the country enters the festive period. Recent tax adjustments and refunds have raised disposable income, and upcoming year-end bonuses are likely to further stimulate spending, the firm said.

Simonis said this seasonal uptick may drive inflation within retail and hospitality sectors due to increased demand.

Should consumer spending rise notably, it may offset some of the relief provided by stable fuel costs, especially if high demand drives up prices for goods and services.

The firm said given these dynamics, its initial forecast of 4.6% average inflation for 2024 is under review.

“With stable fuel prices and moderated but persistent food inflation, a slight downward adjustment is warranted. We now project inflation to settle around 4.5%, provided that fuel prices remain stable and food inflation does not accelerate significantly. This forecast also assumes that consumer spending growth will be tempered by broader economic uncertainties,” the firm said.

It said the revised forecast of 4.5% average inflation for 2024 is grounded in the current balance of inflationary pressures and stabilizing factors, with adjustments as necessary in response to global and domestic developments.

“We will continue to monitor changes in global commodity prices, local supply dynamics, and consumer spending patterns as we conclude 2024 and enter 2025.”

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