Business Reporter
THE Bank of Namibia’s governor, Johannes !Gawaxab, has announced that the repo rate has been reduced by 25 basis points to 6.75%, easing the burden for those who have to honour payments such as mortgages and other loans.
Commercial banks are accordingly expected to reduce their lending rates by 25 basis points, bringing their prime rate to 10.50%. The newly adopted policy stance will continue safeguarding the one-to-one link between the Namibia Dollar and the South African Rand while supporting domestic economic activity.
!Gawaxab said that in determining the appropriate monetary policy stance, the MPC considered several factors in support of a rate cut.
“These included the most recent slowdown in inflation and its projected well-contained trajectory over the medium term, the relatively high level of domestic real interest rates, and the adequate level of foreign reserves. Furthermore, the MPC considered orderly capital flows and the monetary policy easing trends among key central banks. The need for support to the economy was further underlined by recently released official data on the labour market. The MPC remains cognizant of the margin between policy rates in Namibia and the anchor country, South Africa, and will aim to narrow the policy rate differential over the medium term. The committee is also mindful of the widening of the trade deficit, the impact of the imminent settling of international debt obligations on the country’s international reserve holdings, as well as the increased level of global policy uncertainty,” !Gawaxab said.
Touching on the local economy, !Gawaxab said that activity in the domestic economy expanded further during 2024, albeit at a slower pace relative to 2023.
He added that the positive performance was primarily driven by the mining, electricity generation, wholesale and retail trade, tourism, communication and transport sectors, and the livestock marketing subsector.
!Gawaxab said that the diamond mining, diamond processing, and crop production subsectors, however, contracted during the period under review, while the construction sector remained subdued. The projections for real Gross Domestic Product (GDP) have remained unchanged since the previous MPC meeting. Real GDP growth is projected to slow from 4.2% in 2023 to 3.5% in 2024 and rebound to 4.0% in 2025.
“Risks to the economic outlook have continued to gain prominence, especially in the wake of heightened trade wars. Other key external risks include geopolitical tensions, weaker global demand, and the delayed stabilization of the Chinese property market. Internally, adverse weather conditions, depressed diamond prices, and water supply interruptions, particularly in coastal towns, continue to pose downside risks to the growth outlook, as do delays in the improvement of infrastructure,” !Gawaxab said.
