Bank of Namibia (BoN) has forecasted the domestic economy to contract by 7.8 percent in 2020 before a moderate recovery of 2.1 percent in 2021.
“The COVID-19 pandemic has caused domestic economic activity to contract severely during the first six months of 2020. The slump was reflected in sectors such as mining, agriculture, manufacturing, construction, tourism, wholesale and retail trade as well as transport and storage. Activity in the telecommunication and local electricity generation subsectors, however, showed some improvements in the first half of 2020 compared to the same period in 2019,” BoN Governor Johannes !Gawaxab announced on Wednesday.
This comes as the central bank’s Monetary Policy Committee (MPC) cut the Repo rate by 25 basis points from 4 percent to 3.75 percent.
“This decision was taken following a review of global, regional and domestic economic and financial developments. The MPC is of the view that at this level, the rate is appropriate to continue supporting domestic economic activity while at the same time safeguarding the one-to-one link between the Namibia Dollar and the South African Rand,” !Gawaxab said
The central bank decision translates to a cumulative 2.75 percentage points reduction in the Repo rate since the beginning of 2020 and comes after South African Reserve Bank (Sarb) Governor Lesetja Kganyago announced that he had cut that country’s repo rate by 25 basis points to 3.50 percent.
BoN Governor said the MPC resolution, “had to balance the need for further monetary stimulus in the face of the COVID-19 pandemic-induced weaknesses of the economy, against the importance to not undermine sound saving and investment decisions in the economy.”
“The MPC also noted the efforts made to support economic activity and bridging the financing gaps left by the pandemic, and is confident that this will further underpin a recovery of the Namibian economy.”
He said as at the 31st of July 2020, the stock of international reserves stood at N$35.4 billion, compared to N$33.7 billion reported in the June MPC statement.
“This amount of international reserves is estimated to cover 5.3 months of imports of goods and services. At this level, the reserves remain sufficient to protect the peg of the Namibia Dollar to the South African Rand and to meet the country’s international financial obligations,” !Gawaxab said.