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Gradual upturn in inflation rate expected

Gradual upturn in inflation rate expected

Staff Reporter

NEW life is expected to return to the Namibian housing market after the inflation rate decreased to 2.5% and an expected decrease in the interest rate by the Bank of Namibia.

 

According to Floris Bergh, Chief Economist at Capricorn Asset Management, the inflation decreased to 2.5% in November from 3.0% in October.
“We expected 2.6%. The categories that were higher than our expectations were CLF at 1.9% [vs our 1.8%], TRP at 0.1 [-0.2%] and REC at 4.9% [4.7%]. The other categories were all a tad lower than what we pencilled in.”

 

He said the forecasts remain largely unchanged. Only the year-end number for 2019 is shaved to 2.8% [previously 2.9%]. The 2.5% for November should constitute the bottom. He said inflation is likely to pick up from here.

 

 

“We reiterate the risks that could derail our base case scenario. (1.) Grains – SA and global maize prices rise faster than expected. (2.) Meat prices rise sharply in a herd rebuilding scenario. (3.) Oil price shock. (4.) A currency blow-out. (5.) Sin Taxes and Rates and Taxes are hiked more than usual. (6.)

 

Life returns to the residential property market which will enable owners to escalate rentals again. However, these factors will have to be quite nasty for us to follow a path much higher than the blue line on chart 2 – “Scenario 3: High Seasonal Pattern”.

 

Bergh said Capricorn Asset Management’s view is still that the Bank of Namibia should be able to lower interest rates in the current economic malaise. He said that inflation considerations ought not to be of major concern.

 

“In fact, we expect the next cut in interest rates in February 2020. We expect inflation to register 2.8% in December, which will constitute the start of an upturn, albeit gradual.”