The IJG Business Climate Monitor improved to 50.99 points in February, the Institute of Public Policy Research said this week.
This is the first time since December 2016 that the index has been above the 50-point mark.
The leading indicator also showed improvement, climbing to 46.7 points.
“The improvement in the index indicates that the economy is slowly recovering, and should this persist, signals a return to growth in 2018 after the contraction experienced in 2017,” the institute said.
Of the 31 indicators monitored, 16 showed improvement during February, while the remaining 15 posted contractions.
Private sector credit extension continued its slow start to the year, increasing by N$1.1 billion or 1.2 percent month-on-month.
New vehicle sales grew 18.1 percent compared to January, but remain 10 percent lower than a year ago.
“Slow credit extension, weak vehicle sales (coupled with continued contractions in instalment credit) and slow economic growth could see the Bank of Namibia cut interest rates at its next MPC meeting, should it be given the space to do so by a similar move in South Africa. The ‘Ramaphoria’ effect saw a strengthening of the rand, negating the impact of strong oil prices,” the IPPR said.
According to the Namibia Statistics Agency (NSA) annual inflation slowed to 3.5 percent in February.
“This is the lowest since November 2015, and given annual inflation of just 3.6 percent in January, suggests that relatively low inflation can be anticipated for 2018,” the IPPR said.
The index encompasses 31 indicators, selected from available high-frequency data. These are split into five broad categories, namely: policy environment, primary sector output, secondary and tertiary output, external account and pricing.