December outlook remains outlook

The economic outlook for December 2023 remains uncertain, Simonis Storm said this week.

“Our expectation is for interest rates to persist at elevated levels, with any potential rate cuts not materialising until the second half of 2024,” the firm said.

This week, the Bank of Namibia kept its repo rate unchanged at 7.75 percent and the prime rate at 11.5 percent The South African Reserve Bank (SARB) and Federal Reserve Bank (Fed) recently maintained their current interest rates.

Simonis said the decision to keep rates unchanged is primarily rooted in the preservation of the currency peg between the Namibian dollar and the South African rand. This step is vital for ensuring a steady influx of imports, which, in turn, supports the broader goal of maintaining stable prices.

The current rate hiking cycle has been exceptionally aggressive as the repo rate increased by 400bps
in 18 months, the firm said.

The stock of international reserves has registered a slight decrease, standing at N$53.8 billion. This marks a decline from the N$55.6 billion reported at the end of August 2023 and the N$54.2 billion documented during the previous Monetary Policy Committee (MPC) meeting.

At its current level, the stock of international reserves is estimated to cover 5.6 months of imports, thereby retaining its adequacy to uphold the currency peg between the Namibian dollar and the South African rand, as well as fulfil the country’s international financial obligations.

“Most central banks, including the South African Reserve Bank, have been to maintain their policy rates
at the most recent monetary policy meetings. In general, central banks worldwide anticipate a more
extended period of elevated interest rates and remain resolute in their commitment to achieving inflation
levels consistent with their respective targets in the foreseeable future,” said Simonis.

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