CHAMWE KAIRA
Simonis Storm anticipates a further 25 basis-point rate cut, bringing the repo rate to 7%, at the Bank of Namibia’s Monetary Policy Committee (MPC) meeting in December.
Simonis expects the Bank of Namibia to take a cautious approach, observing the effects of this easing before any further policy adjustments. Similarly, the South African Reserve Bank (SARB) will hold its next MPC meeting on 21 November, where Simonis expects a comparable 25 basis-point rate reduction.
The current repo rate in Namibia is 7.25%, with a prime lending rate of 11.00%. While these levels remain elevated, the recent reduction offers some relief to households and businesses by slightly lowering borrowing costs, Simonis said.
In comparison, South Africa’s repo rate stands at 8%, and its prime lending rate is 11.50%.
“Despite these adjustments, we expect private sector credit extension growth to remain modest in the short term due to the lag effect of rate changes, which often take time to impact the broader economy,” the firm said.
Simonis projects that inflation will stabilise around 4.7% year-over-year by the end of 2024.
However, inflation deceleration could be challenged by global supply chain shifts or import price volatility, given Namibia’s reliance on imported goods and fuel, the firm said.
The Bank of Namibia’s (BoN) ongoing monitoring of inflation dynamics will be crucial, as premature or aggressive rate cuts could reintroduce inflationary pressures, particularly if consumer demand strengthens rapidly, Simonis said.
The firm noted that the BoN’s strategy of gradual rate cuts aims to control inflation while supporting domestic demand amid a slowing global economy.
“However, Namibia’s high reliance on resource-driven liquidity and foreign reserves exposes it to external shocks, which could complicate BoN’s efforts to maintain stability. Moving forward, structural reforms to diversify Namibia’s economic base and reduce cyclical dependencies are essential. These changes would not only strengthen economic resilience but also give BoN greater policy flexibility, laying a foundation for sustainable growth and stability amid evolving global conditions,” the firm said.
Looking ahead, the ongoing interest rate cuts by the South African Reserve Bank (SARB) are expected to ease pressure on heavily indebted households.
Following the September rate cut, an additional 25 basis point cut in the repo rate is anticipated in November, which may provide further relief to constrained consumers as the SARB’s monetary easing cycle continues.
“This combination of corporate resilience, improving building sector confidence, and anticipated rate cuts signals a cautiously optimistic outlook for credit demand in both the corporate and household sectors,” the firm said.
