Central Bank cuts Repo rate by 25 basis points
The Monetary Policy Committee of the Bank of Namibia decided to cut the Repo rate by 25 basis points to from 6.5% 6.25%, Bank of Namibia Governor, Iipumbu Shiimi announced this week.
The repo rate, which is the benchmark interest rate at which the Bank of Namibia lends money to other banks, was reduced to support the domestic economy and to maintain the one-to-one link between the Namibia Dollar and the South African Rand. The decision also comes shortly after the South African Reserve Bank reduced its interest rate by from 6.5% to 6.25% in January this year.
Central Bank indicators suggest that domestic economic activity contracted in 2019 compared to a marginally positive growth rate in 2018.
“The deterioration in 2019 was mainly due to declining economic activity in sectors such as mining, agriculture, manufacturing, as well as wholesale and retail trade,” Shiimi said.
Shiimi further said other sectors including transport and construction improved during 2019, relative to the corresponding period of 2018. The Bank forecasts the domestic economy to improve in 2020.
Meanwhile, the inflation rate declined to 3.7% during 2019 from 4.3% in 2018, while the growth in private sector credit extension increased marginally to 6.8% during 2019 from 6.3% in 2018. The current stock of international reserves declined to N$31 billion from the N$32.5 billion seen in December 2019.
On a global front, Shiimi stated that the global economic growth is estimated to have slowed in 2019 compared to 2018, adding since the December 2019 Monetary Policy Meeting, inflation rates in most key monitored economies remained well contained, while monetary policy stances were left unchanged with the exception of Brazil, Russia and South Africa that eased their interest rates.
Shiimi said while the global economy is projected to rise to 3.3% in 2020, “risks to the growth outlook include geopolitical tensions, tension in US-China trade relation, the coronavirus outbreak, and weather-related disasters.”