Repo on hold

The Bank of Namibia this week decided to maintain the repo rate, leaving it steady at 7%. The Deputy Governor Ebson Uanguta said on Wednesday the decision not to hike the repo rate was necessary to support economic growth.
Motivated Uanguta, “This decision was necessary to continue supporting the country’s economic growth, particularly in light of slow and fragile recovery in the economies of key trading partners. Growth is expected to be positive however risks remain which include low commodity prices, volatile exchange rate, the prevailing drought and slow recovery in the economies of Namibia’s trading partners.”
Meanwhile, the annual inflation rate rose during the first seven months of 2016 while the inflation rate increased to 7% in July 2016 from 6.7% in the previous month. The main drivers according to the Bank of Namibia were increases for the categories food and non-alcoholic beverages, housing, water, electricity, gas and other fuels.
Said Uanguta, “going forward, annual inflation is projected to increase, but remain within acceptable levels for the remainder of the year.
Uanguta also noted that the growth in Private Sector Credit Extension slowed in the first six months of the year when compared to the corresponding period in 2015. The annual growth in Private Sector Credit Extension stood at 12.4% according to the Bank of Namibia. Said Uanguta, “this slowed growth stemmed from a reduced growth in credit advanced to both the corporate and household sectors in most credit categories.
Capricorn analyst Suta Kavari this week correctly predicted that the Bank of Namibia would not be rising the repo rate. Making the call, he said, “While inflation in Namibia accelerated to 7% in July as a result of surging food prices and higher administered prices, we expect near-term inflationary relief on the back of a strengthening currency and slipping commodity prices, particularly Brent crude oil.
“Growth in Private Sector Credit Extension has been moderating due to slower growth in credit extended to both corporates and households. We expect this downward trend to continue on account of the tightening monetary policy cycle, and more cautious lending practices, providing Bank of Namibia with some leeway to stand pat for now. The Bank of Namibia was aiming to tame growth in household credit, in particular instalment credit and ‘unproductive’ vehicle sales growth.”