By CentralBankNews.info
Namibia’s central bank left its benchmark repo rate at 6.0 percent “to support domestic activities” but reiterated its concern over growth of credit to households that is used to pay for the import of cars and luxury goods, boosting the trade deficit and putting pressure on international reserves.
The Bank of Namibia, which has raised its rate by 50 basis points this year, said the country’s trade deficit widened further in the third quarter of the year, driven by imports of capital goods, vehicles and other consumer goods.
“Despite this pressure, the international reserves remain sufficient to meet the country’s foreign obligations,” the central bank added.
The latest data from the central bank shows that Namibia’s trade deficit narrowed slightly to 5.649 billion Namibian dollars in the second quarter from 6.785 billion in the first quarter.
Credit to Namibia’s private sector grew by an average of 15.6 percent in the first 10 months of the year, up from 15.0 percent in the same year-ago period.
The central bank is concerned over high growth in overdraft and installment credit to households, which expanded by an average of 25.3 percent and 19.1 percent over the last three months. Although the growth remains high, the bank said it had moderated in recent months.
The outlook for inflation has recently improved, the bank said, due to the drop in fuel prices and the overall annual inflation rate for this year is expected to be around 5.4 percent. This estimate is down from October’s estimate of 5.5 percent.
In October Namibia’s inflation rate eased to 4.98 percent from 5.28 percent, the fourth consecutive month of declining inflation.
The economy of Namibia is expected to improve next year, supported by construction, and wholesale and retail trade. Gross Domestic Product is estimated at 5.3 percent this year and 5.6 percent in 2015.
In the second quarter, Namibia’s GDP expanded by an annual rate of 3.0 percent, down from 4.4 percent in the second quarter.