Research experts Simonis Storm have maintained a vigilant outlook on the inflationary trends in Namibia highlighting that given the observed data and current economic indicators, they project that inflation rates will continue to show a downward trajectory in the forthcoming year.
“For the fiscal year 2024, we are forecasting an average inflation rate of approximately 4.9%. This forecast is underpinned by our expectation of persistently lower petrol and food prices, coupled with a stable Rand, especially in the first quarter of 2024. These factors are anticipated to be key drivers in moderating headline inflation in Namibia,” said the firm.
Furthermore, the experts noted that they expect that global economic trends, particularly in the energy and food sectors, will continue to exert significant influence on local inflation dynamics.
“It is crucial to note that our projections are subject to potential shifts in global economic conditions, policy changes, and unforeseen events that could impact commodity prices and exchange rates. As such, our analysis will remain adaptable, responding to emerging data and trends to provide the most current and relevant economic insights.”
In December 2023, Namibia witnessed a notable moderation in its annual inflation rate, registering at 5.3% y/y. This marked a deceleration from the 5.7% y/y observed in November 2023 and a more significant drop from the 6.9% recorded in December 2022. Intriguingly, the monthly inflation rate in December 2023 experienced a deflation of 0.1% m/m, a shift from the 0.3% m/m inflation noted in November 2023. This instance of deflation was the first observed since the 0.2% m/m deflation recorded in August 2021.
Across the entirety of 2023, the 12-month annual average inflation rate was 5.9%, reflecting a modest slowdown from the 6.1% documented in 2022. A regional breakdown reveals varied inflation dynamics within the country. In December 2023, Zone 1, encompassing the northern region, reported a y/y inflation rate of 5.9%, surpassing the national headline figure. Meanwhile, Zone 2, representing the Khomas region, recorded an annual inflation rate of 5.0% y/y. Similarly, Zone 3, which includes the Hardap, ||Karas, Omaheke, and Erongo regions, saw its annual inflation rate settle at 4.9% y/y, both below the national headline inflation rate.
In the analysis of Namibia’s overall inflation rate of 5.3% y/y for December 2023, the contributions from various categories remained largely consistent with those of November 2023, with notable exceptions. The food and non-alcoholic beverages category, which had a significant impact on inflation, contributed 1.4 percentage points in December 2023, a decrease from the 1.8 percentage points noted in November 2023. The transport category’s contribution also declined, registering at 0.6 percentage points in December 2023 compared to 0.8 percentage points in the preceding month. Additionally, the recreation and culture category’s contribution moderated to 0.3 percentage points in December 2023 from the 0.4 percentage points reported in November 2023.
“A closer look at the sectors contributing to the slowdown in annual inflation reveals several key drivers. The transport category exhibited a notable deceleration, with inflation in this sector reducing to 4.0% y/y in December 2023, down from the steep 14.8% y/y observed in December 2022. Similarly, the food and non-alcoholic beverages category saw its inflation rate slowdown to 7.4% y/y in December 2023, compared to 11.8% in the same month of the previous year. The hotels and restaurants sector also contributed to this trend, with its inflation rate slowing to 6.5% y/y in December 2023 from 11.7% y/y in December 2022. Furthermore, the furnishing and household equipment sector recorded a deceleration in its inflation rate to 5.1% y/y in December 2023, down from 10.6% in December 2022,” Simonis Storm said.
In December 2023, the food and non-alcoholic beverages category, which constitutes a significant portion of the inflation basket, continued as a primary driver of headline inflation, albeit with a decelerating trend. This category’s inflation rate slowed for the 10th consecutive month, registering 7.4% y/y, down from 11.8% in December 2022. Within the food subcategories, oils and fats experienced a notable shift, registering a deflation of 2.2% in December 2023.
This marked a significant slowdown from the 20.8% y/y inflation recorded in December 2022. The inflation rate for bread and cereals also moderated, standing at 1.9% y/y in December 2023, a substantial slowdown from 18.2% y/y in the same month of the previous year. In the same month, the UN Food and Agriculture Organization reported a decline of 1.8 percentage points in its food price index, reaching 118.5 points.
“This change was characterized by fluctuations across various commodities. Wheat export prices increased due to weather-related disruptions and geopolitical tensions in the Black Sea region. Maize prices saw an upturn, influenced by concerns about crop plantings in Brazil and logistical challenges in Ukraine. Global vegetable oil prices declined, driven by reduced purchasing activity from major importers.
“The dairy price index rose, led by higher prices for butter, whole milk powder, and cheese, buoyed by strong sales in Western Europe and heightened demand from the Near East. International pig meat prices fell due to diminished Asian import demand, while bovine and poultry meat prices also saw declines. In contrast, ovine meat prices rebounded, driven by increased demand ahead of holidays and reduced slaughter supplies in Oceania. The international sugar price experienced a notable plunge in December, influenced by strong production in Brazil and lower ethanol sales, leading to the highest annual average FAO Sugar Price Index since 2011, amid concerns over a tighter global sugar balance in 2023,” explained Simonis Storm.