Prices locally reach highest level since June 2017

The prices of goods and services in Namibia increased by a significant 6% during June 2022, the highest inflation rate recorded since June 2017 (6.1%), according to the Namibia Statistics Agency (NSA).

This represents a 1.9 percentage points increase when compared to 4.1% recorded in June 2021. In May 2022, the inflation rate stood at 5.4%.

Transport, food and non-alcoholic beverages categories continue to be the main drivers of inflation. Overall transport inflation stood at 18.6%, while food and non-alcoholic beverages recorded 7%.

More specifically, operation of personal transport equipment sub category, which captures fuel, was the main driver of inflation in the transport category, recording 32%.

In addition, oil and fats and fruits were the main driver of inflation for the food and non-alcoholic beverages category, each registering an inflation rate of 26.2% and 18.1%, respectively.

Looking at zonal inflation, the statistics revealed that Zone 2 (Windhoek) has been recording the highest inflation rates since the beginning of the year relative to other regions.

During the period under review, inflation in Windhoek stood at 6.7% and averaged 5.9%, year to date.

Zone 1 (Kavango East, Kavango West, Kunene, Ohangwena, Omusati, Oshana, Oshikoto, Otjozondjupa, and Zambezi) recorded an inflation rate of 5.6% and averaged 4.6%, year to date.

Lastly, for Zone 3 (//Kharas, Erongo, Hardap and Omaheke), year to date, inflation averaged 4.8% and recorded an inflation rate of 5.6% in June 2022.

OUTLOOK

According to local economist Dr Sakaria Kalumbu, the increase in prices might cause a reduction in private savings because consumers will be forced to relocate resources towards consumption. Private consumption might also fall due to these increasing prices.

“Increases in inflation are expect due to the spill over effect that runs from the increasing fuel prices. This is to be expected until such a time where the fuel prices stabilize,” Kalumbu said.

Also commenting on the statistics is local analyst Josef Sheehama, noting that the rise in prices is considerably higher than the increase in average earnings. Employers are unlikely to compensate their staff for this extra and might well limit pay rises.

“Additionally, as inflation rises, it erodes the spending power of your hard-earned cash. So, it’s important to make sure your money is working hard for you. But it’s almost impossible to find a savings account to beat inflation at the moment,” he said.

The ruling, if left uncontested, will not only disrupt the industry but will further suppress economic recovery, considering the current threat the country's economy is facing. The whole country is going to feel squeezed throughout 2022. Also, when inflation gets too hot, the government might shift toward a contractionary fiscal policy. These measures, such as hiking interest rates and increasing the cost of borrowing, could slow economic activity and depress standard prices. The result will be even higher costs for businesses, and a deep squeeze in the cost of living for households.

“Going forward, monetary policy in Namibia is oriented towards keeping inflation low and stable. The Bank of Namibia’s Monetary Policy Committee is set to meet on the 17 August 2022. So, if the Bank of Namibia wants to curb inflation, it may raise the repo rate. I believe that the Bank of Namibia will increase the repo rate by 0.50% basis points,” the analyst [email protected]