THE Monetary Policy Committee (MPC) of the Bank of Namibia (BoN) has decided to keep interest rates unchanged at 3.75 %.
The MPC is of the view that the rate remains appropriate to continue supporting domestic economic activity, while at the same time safeguarding the one-to-one link between the Namibia Dollar and the South African Rand.
The Governor of the central bank, Johannes! Gawaxab noted that domestic economic activity declined during the first ten months of 2020 and is estimated to register an overall contraction in 2020, before an expected modest recovery in 2021.
The annual average inflation declined to 2.2% during the first ten months of 2020 compared to 4.0 % in the corresponding period of 2019.
The lower inflation was mainly due to the decline in transport and housing inflation, mainly on account of deflationary pressure emanating from the depressed rental market and low international price of oil. On a monthly basis, the inflation rate declined to 2.3% in October 2020, from 2.4 % in September 2020. Overall inflation is projected to average 2.3% in 2020.
Average growth in Private Sector Credit Extension (PSCE) declined to 3.6% during the first ten months of 2020, lower than the 6.8 % recorded over the same period in 2019.
The slowdown in PSCE was due to lower demand for credit that arose from weak overall domestic economic activity and the repayments made by businesses during the period under review.
The growth in credit extended to businesses declined to 0.8 % during the first ten months of 2020 compared to 8.7% over the same period in 2019. Since the previous MPC meeting, growth in PSCE slowed to 1.4 % at the end of October 2020 from 2.6 in August 2020, mainly due to a lower uptake of credit by businesses.