The stock of international reserves stood higher at N$55.6 billion as at the 31st of May 2024, up from N$54.3 billion on the 31st of March 2024 supported by higher SACU receipts and customer foreign currency placements.
According to the Bank of Namibia, at this level, the international reserves stock is estimated to cover 3.9 months of imports, remaining sufficient to sustain the currency peg between the Namibia Dollar and the South African Rand, while meeting the country’s international financial obligations.
“The import cover excluding hydrocarbon exploration-related imports, which are funded from abroad, stood higher at 4.4 months,” the central bank said.
Bank of Namibia Governor, Johannes Gawaxab revealed this while announcing that the Monetary Policy Committee (MPC) of the Bank of Namibia had held its third bi-monthly meeting for 2024 to decide on the appropriate monetary policy stance to be implemented over the next two months and decided to hold the Repo rate steady at its current level of 7.75 percent.
“Domestic economic activity expanded further during the first four months of 2024. The increase in output mainly emanated from the mining, electricity generation, wholesale and retail trade, tourism, communication, and transport sectors. Looking ahead, the growth in Namibia’s real gross domestic product (GDP) is projected to moderate from 4.2 percent in 2023 to 3.7 percent in 2024 due to the anticipated slowdown in the primary industry, partly as a result of the drought conditions,” Gawaxab said.
Gawaxab also said that risks to the domestic economic prospects from both external and domestic factors have on balance remained broadly the same since the previous MPC meeting.
“External risks reflect the prolonged tight global monetary policy stance, disruptive geopolitical tensions and geoeconomic fragmentation as well as China’s faltering recovery. Risks further include negative spillover effects from the election and the electricity situation in South Africa, both of which have softened. At the same time, risks from adverse developments in the international diamond market have increased, negatively impacting diamond prices, and therefore warrant monitoring going forward. Internal risks remain the drought and water supply interruptions, particularly at the coastal towns.”
Domestic inflationary pressures continued to ease year-to-date. On average, inflation slowed to 4.9 percent during the first five months of 2024, compared to 6.8 percent during the same period in 2023. The deceleration was predominantly due to lower food inflation.
“Since the previous MPC meeting, however, monthly annual inflation outcomes have edged up to 4.9 percent in May 2024, relative to 4.5 percent for March 2024, attributed to increases in transport and housing inflation. Going forward, average inflation is projected to moderate from 5.9 percent in 2023 to 4.9 percent in 2024 and 4.5 percent in 2025,” Gawaxab said.
Annual growth in PSCE moderated further to 1.6 percent in April 2024 from the 1.7 percent growth rate for February 2023. Likewise, PSCE growth averaged 1.7 percent during the first four months of 2024, down from 3.0 percent recorded in the corresponding period in 2023. This was on account of lower credit uptake by households, particularly in the categories of mortgages and other loans, advances and overdrafts.
Namibia’s merchandise trade deficit widened to N$13.5 billion during the first four months of 2024 compared to N$9.1 billion during the corresponding period of 2023. The widening of the trade deficit was mainly due to a fall in export earnings, reflecting lower export volumes and realised prices for diamonds, coupled with a lower volume of uranium exports. The higher import payments for consumer goods, machinery, base metals and products of the chemical industry further contributed to the rise in the trade deficit.
Global output maintained positive growth in the first quarter of 2024, and it is projected to remain resilient throughout the year. Some inflationary pressures persisted in both the Advanced Economies (AEs) and the Emerging Market and Developing Economies (EMDEs). While most monitored central banks kept their policy rates unchanged since the previous MPC meeting, the European Central Bank lowered its rates, joining the Bank of Brazil which began cutting rates in 2023.