Sunday 16 May 2021
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Inflation expected to pick up in 2020

By Megameno Shikwambi

The Namibian Statistics Agency (NSA) has released the inflation numbers for December 2019 and indications are that overall inflation slowed to 2.6% y-o-y in December 2019 compared to 5.1% in the prior year.
“Annually, average inflation slowed to 3.7%, which was below our best case forecast of 3.9%. The decrease in inflation was fuelled by a combination of categories that remained stubbornly low,” said Simonis Storm firm.
Food and non-alcoholic beverages
This category weighs 16.45% of the overall basket and contributed 0.3 percentage points to the headline outcome.
The category increased at a slow pace of 1.8% y-o-y in December 2019, which is the lowest since a 1.7% recorded in March 2011.
Fruit and vegetables remain the only subcategories with upward cost pressure, recording 11.6% and 13.4%, respectively, in December 2019. On the contrary, food and non-alcoholic beverages recorded a deflation of 0.6%, with the highest deflation recorded in the food products (-2.4%) sub-category.
Alcoholic beverages and tobacco
This category weighs 12.59% of the overall basket and contributed 0.4 percentage points to the headline outcome.
Sin inflation also remained low, recording a 3.2% y-o-y in December 2019.
Tobacco has been in deflation over the last 8 months, currently at -4.3%. Any increase in sin taxes at the budget in February 2020 will result into rising inflation.
Housing, water, electricity, gas and other fuels
This category weighs 28.36% of the overall basket and contributed 0.5 percentage points to the headline inflation. Inflation in this category remained stubbornly low throughout 2019, recording a 1.9% y-o-y in December 2019.
The biggest contributor to the slow growth was the electricity, gas and other fuels subcategory, which recorded a deflation over the last 8 months (currently 0.8%). This followed the 2.5% drop in electricity tariffs in July 2019. Furthermore, inflation for rental payments of dwellings has stabilised around 2.3% throughout 2019, suggesting that housing prices are bottoming out.
This category weighs 14.28% of the overall basket and contributed 0.3 percentage points to the headline inflation.
Subdued global oil prices have supported low local petrol prices in 2019. As a result of low petrol prices, public transportation services inflation has slowed significantly to 3.1% in December 2019 compared to 18.2% in the prior year.
Simonis Storm expect inflation to rise further to 4.8% in 2020.
“Our assumption is based on expected meat price increases. Furthermore, continuous effort from OPEC and Russia to cut oil production could put upward pressure on oil prices in 2020. With the expected below normal to normal rainfall, we expect food prices to stabilise in 2020. Low inflation, amidst negative GDP continue to reinforce interest rate cuts,” said Indileni Nanghonga of Simonis Storm.
Regional growth expected to pick up
Meanwhile, as experts project a 0.9% growth in the domestic economy, the World Bank has said regional growth is expected to pick up to 2.9% in 2020, assuming investor confidence improves in some large economies, energy bottlenecks ease, a pickup in oil production contributes to recovery in oil exporters and robust growth continues among agricultural commodity exporters.
“The forecast is weaker than previously expected reflecting softer demand from key trading partners, lower commodity prices, and adverse domestic developments in several countries. In South Africa, growth is expected to pick up to 0.9%, assuming the new administration’s reform agenda gathers pace, policy uncertainty wanes, and investment gradually recovers,” said the bank.
Growth in Nigeria is expected to edge up to 2.1% as the macroeconomic framework is not conducive to confidence.
Growth in Angola is anticipated to accelerate to 1.5%, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment, and bolster private investment.
In the West African Economic and Monetary Union, growth is expected to hold steady at 6.4%. In Kenya, growth is seen edging up to 6%.
The bank has also pointed that global growth is projected at 2.5 percent in 2020, just above the post-crisis low registered last year.
“While growth could be stronger if reduced trade tensions mitigate uncertainty, the balance of risks is to the downside.
A steep productivity growth slowdown has been underway in emerging and developing economies since the global financial crisis, despite the largest, fastest, and most broad-based accumulation of debt since the 1970s.
These circumstances add urgency to the need to rebuild macroeconomic policy space and undertake reforms to rekindle productivity,” said the bank.

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