Economic Association sees inflation uptick in H2
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18 May 2018
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The Economic Association of Namibia (EAN) expects inflation, which increased slightly from 3.5 percent in the previous two months to 3.6 percent in April, to pick up during the remainder of 2018.
According to the EAN, the increase will be based on a number of factors, including the fact that 2017 started with a relatively high inflation rate of 8.2 percent which slowed down continuously throughout the year to 5.2 percent in December.
“The lower inflation rates particularly in the second half of 2017 provide a lower price level and hence price increases expected for the next couple of months will result in higher percentage changes,” Klaus Schade, a Research Associate at EAN said.
He said future prices for maize on the Johannesburg Stock Exchange suggest price increases from N$2,085 per tonne currently to N$2,244 per tonne in December and from N$2,178 per ton for yellow maize to N$2,326 per tonne in December, which is expected to exert upward pressure on food prices.
Schade said oil prices which are on the increase, with Brent oil spot prices averaging US$72.11 per barrel in April 2018, the highest monthly average since November 2014 (US$79.44 per barrel), is also expected to contribute to higher inflation figures for the year.
“Prices are expected to at least remain at this level if not increase further mainly due to the continuous supply cuts by OPEC and non-OPEC member states and the withdrawal of the USA from the Joint Comprehensive Plan of Action with Iran and looming re-introduction of sanctions. Increased oil production in the USA owing to more favourable prices is not expected to level out these factors.”
Schade said higher oil prices will not only have a direct impact on transport inflation, but will ripple through the economy over time, because of increased input costs for companies.
“In a country with one of the highest income inequalities globally, an average inflation rate is less useful as in countries with a more homogenous distribution of income. Low-income households have different consumption patterns than middle or higher income households since they need to satisfy their basic needs first.”
 
 

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