Inflation expected to continue upward trajectory
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17 August 2018
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Namibians can expect the cost of living to continue to increase for the rest of the year going into Christmas, a local economist has predicted.
Inflation accelerated to 4.5 percent in July from 4 percent in June, the Namibia Statistics Agency (NSA) said this week.
On a monthly basis, the inflation rate increased to 0.5 percent compared to 0.2 percent recorded during the previous month.
“We believe inflation reached the bottom of the cycle in April and will increase steadily during the remainder of 2018. Increases in a range of municipality and electricity charges, which became effective on July 1, have boosted inflation, but they are not expected to increase again this year,” Eloise du Plessis, Head of Research at PSG Namibia said.
She said food prices are only expected to rise modestly and sluggish domestic economic growth should subdue demand-pull price pressures.
“However, the sharp weakening of the Namibian dollar due to weaker emerging market sentiment will put pressure on import prices in coming months. Given the pressures on inflation and international reserves, we expect the central bank to keep its repo rate unchanged for the remainder of 2018 despite meagre economic growth and inflation remaining within acceptable levels,” du Plessis said.
The annual inflation rate for housing, water, electricity, gas and other fuels stood at 3.7 percent in July 2018 compared to 9.1 percent recorded during the same period a year earlier.
“The decrease emanated from the declines registered in the price levels of all the sub-groups comprising housing, water, electricity, gas and other fuels with the exception of electricity, gas and other fuels which increased to 8.4 percent from 6.9 percent recorded in July of the preceding year,” the agency said.
On a monthly basis, the inflation rate for this group increased to 0.8 percent compared to -0.1 percent the previous month.
During July, the annual inflation rate for the transport group stood at 8.9 percent compared to 2.4 percent in July 2017, resulting in an increase of 6.5 percentage points.
Klaus Schade, research associate at the Economic Association of Namibia, expects continuous upward pressure on inflation owing to rising fuel prices that were increased by 25 cents per litre because of the adjustment of the fuel tax in August.
“Although international oil prices have eased slightly, the depreciation of the Namibia dollar will increase the cost of oil in domestic currency. If not fully or partly absorbed by the National Energy Fund as in the previous months, under-recoveries will lead to fuel price increases. In addition, the municipality has increased bus fares, which will add further pressure on transportation costs,” he said.
In terms of food inflation, Schade said future maize prices eased slightly in July compared to June on a monthly average, but are on the increase again, while wheat prices continue to increase.
“However, monthly average wheat prices are below prices a year ago. Maize prices, on the other hand, exceed price levels last year. Hence, food price inflation is expected to remain at the current level.”
 
 
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