Chamwe Kaira
Namibia’s annual inflation rate eased to 3.5% in July from 3.7% in June, resuming the downward trend seen earlier in the year.
However, an analyst has warned that risks remain skewed to the upside heading into the last part of 2025.
Almandro Jansen of Simonis Storm Securities said imported cost pressures continue to present the main threat.
He pointed to the 30% US tariff on South African exports and ongoing reviews of US tariffs on Chinese goods as new sources of uncertainty in global supply chains.
“For Namibia, the short-term impact may involve marginal relief from surplus South African goods entering the local market. However, the medium-term effect is likely to be higher prices for vehicles, machinery, processed food, and other consumer goods as South African production slows and regional supply chains adjust,” Jansen said.
He added that currency dynamics contribute to the risks.
“While a weaker rand initially improves import competitiveness, it often transmits inflationary pressures as regional producers reprice,” he said.
While domestic credit conditions continue to support accommodative policy, Jansen cautioned that the Bank of Namibia (BoN) must exercise caution.
“Any further rate cuts will require weighing the benefits of stimulating demand against the risk of amplifying imported inflation.”
At its August meeting, the BoN kept the repo rate unchanged at 6.75% to safeguard the Namibia dollar’s peg to the South African rand while supporting domestic recovery.
The South African Reserve Bank cut its repo rate to 7% in the same month, narrowing the interest rate gap between the two countries to 25 basis points.
“For the BoN, this differential remains small but manageable, provided that capital flows and exchange rate stability are maintained,” Jansen said.
Looking ahead, Simonis expects a final 25 basis points cut in the third and fourth quarters, which would bring the repo rate down to 6.50%.
“Such a move would reinforce credit growth by reducing borrowing costs across mortgages, overdrafts, and instalment credit, particularly for interest rate-sensitive sectors such as housing and consumer durables,” Jansen said.
Private sector credit extension (PSCE) grew 5.7% in July, matching June’s pace and reaching its highest level since early 2020.
Simonis expects PSCE growth to exceed 6% in the last few months of 2025, supported by a potential repo rate cut, moderating but steady corporate credit appetite in manufacturing, energy and retail and a gradual increase in household demand for secured lending on vehicles and mortgages.
Caption
Inflation is expected to take an upward trend in the last two quarters.
- Photo: Contributed
