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Price pressure to ease off during the year

Over the past four months, Namibians were faced with an increase in fuel prices which went up three time, sky-rocketing food prices and an increaseing taxi fares. However, Klaus Schade, an economic researcher, says 2012 could become a better year for Namibians.
Schade bases this view on increased production in the non-diamond mining sector such as copper and uranium, government’s Targeted Intervention Programme for Employment and Economic Growth (TIPEEG) gaining momentum and commencements of other new business activities such as the poultry factory near Windhoek could cover Namibia’s demand for broilers.
However, the International Monetary Fund’s forecast for 2012 was adjusted downward from 3.3% in September 2011 to 2.5% in January 2012. This was mainly due to the continuing sovereign debt crisis in the Euro-zone area.
Schade emphasised that since the uncertainties concerning the sovereign debt crisis in Europe and the high debt levels in the USA are prevailing, it is expected that gold will display a strong performance during 2012. Copper and zinc prices closed of 2011 with 22.5 % and 26.0% respectively but gained some ground again since the beginning of 2012, with copper prices increased by 12 % and zinc prices by 16%.
In his “Economy Watch Namibia-March 2012”, Schade said that the Namibian Dollar depreciated by 22.8, 22.2 and 18.9 % against the US dollar, British pound and Euro respectively during 2011. Since the beginning of 2012 however, the local currency strengthened again by between 4 and 5 %.
He noted that Namiba has experienced one of the lowest inflation rates within the Southern African Customs Union during 2011, ending the year with an annual inflation rate of 5.0%, on par with two other Southern African countries, Lesotho and South Africa.
The recent increase in excise duties also known as “sin taxes” will result in higher inflation rates for the category of “Alcoholic beverages”, while the drop in maize prices on international markets is expected to filter through to food prices and ease the price pressure. Namibians can expect further electricity increases in the middle of the year and continous strong demand for houses that will result in upward price pressure for the housing category. Overall, Schade said that the country can expect inflation to move towards 7% on average during 2012.
Schade believes that government should consider calculating and publishing inflation rates for higher income and lower income households in addition to the average inflation measure. This, Schade concludes, will provide the government with the necessary information to adjust social grants regularly.
Namibia has experienced one of the lowest inflation rates within the Southern African Customs Union during 2011, ending the year with an annual inflation rate of 5.0%– on par with Lesotho and South Africa.

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