As at the 31st of July 2022, the stock of international reserves stood at N$49.2 billion compared to N$43.9 billion at the end of May 2022, the Bank of Namibia has said.
The Bank noted that the increase in international reserves was mainly due to SACU receipts, diamond proceeds and portfolio flows.
“At this level, international reserves are estimated to cover 6.1 months of imports, and hence remain adequate to meet the country’s international financial obligations,” Deputy Governor of the Bank, Ebson Uanguta said last week.
Uanguta further stated that the performance of the domestic economy continued to improve in the first half of 2022, though output remains below the pre-COVID-19 levels.
Year-to-date developments indicate that activity in the domestic economy increased during the first six months of 2022, as reflected in sectors such as mining, agriculture, wholesale and retail trade, transport, communication and tourism.
“Going forward, the domestic economy is expected to grow by 3.2 percent in 2022, mainly driven by the recovery in the mining, electricity water and tourism sectors.
“Risks to the domestic economic outlook in the medium term continue to be dominated by the impact of the Russia – Ukraine war, global supply chain disruptions and high oil and food prices. Other risks include climatic swings, animal disease outbreaks within the region, the possible emergence of new COVID-19 variants and other infectious diseases as well as intensified geopolitical tensions,” he said.
Inflation accelerated to an average of 5.3 percent during the first seven months of 2022, compared to 3.5 percent in the corresponding period of 2021. The acceleration was mainly driven by an increase in the inflation for transport, on account of a rise in international oil prices. On a monthly basis, inflation rose to 6.8 percent in July 2022 from 6.0 percent registered in June, mainly due to higher inflation for transport and food in the same period. Namibia’s overall inflation is now projected to average around 5.8 percent for 2022, with higher rates in the second half of the year than in the first half.
“Since the last Monetary Policy Committee (MPC) meeting, year-on-year growth in PSCE moderated to 3.4 percent in June 2022 from 3.8 percent recorded in April 2022. The moderation was mainly due to lower demand for short-term asset-backed credit facilities and other loans and advances, specifically by corporates in the energy, mining and commercial services sectors. Year to date, average growth in PSCE increased to 3.2 percent during the first six months of 2022, higher than the 2.4 percent registered during the same period in 2021, on the back of a rise in demand for credit by businesses,” Uanguta further explained.
Going forward, global economic growth is projected to slow down in 2022 compared to 2021. In particular, the IMF has projected global real GDP growth to moderate further to 3.2 percent in 2022 from 6.1 percent in 2021. The AEs are projected to slow down to 2.5 percent growth in 2022 from 5.2 percent in 2021, whereas growth in the EMDEs is projected to moderate to 3.6 percent in 2022 from 6.8 percent in 2021. The downward revision to the global outlook for 2022 is mainly due to spill overs from the Russia-Ukraine war, tighter financial conditions, weaker household purchasing power, and possible further lockdowns and the deepening real estate crisis in China. Key risks to the global economic outlook include the prolonging and/or intensification of the above-mentioned factors as well as potential rising geopolitical tensions in the Asia-Pacific region.
“Since the last MPC meeting most monitored commodity prices trended lower although remaining elevated. Prices including those of Brent crude oil, uranium and zinc as well as food nevertheless increased on a yearly basis, mainly due to significant supply disruptions following international sanctions that inhibited the Russian supply of oil, gas and base metals. The exception was observed in prices for copper and gold which declined. With the realisation of some of the downside risks to the global economy, commodity prices may be negatively affected.
“Global equity markets, while remaining volatile amid increased uncertainty, recorded positive gains during July 2022 and the first half of August 2022. This rally followed losses in the first half of the year with a sell-off in June 2022 ascribed to higher-than expected inflation data and aggressive monetary policy responses. The rally in equity markets during most of July 2022 and August 2022 was principally driven by tech stock, following stronger-than-expected quarterly earnings from most companies, which offset weak global economic data. The expectations that the Fed would slow interest rate hikes at its future meetings also aided this rally,” Uanguta said.