Trade deficits could weigh on foreign reserves
Consistent outflow of capital
Global oil prices, a weaker Rand exchange rate and higher commodity prices inflated the import bill.
Over the period January 2022 to November 2022, Namibia did not record any trade surplus, with the trade deficit averaging N$2.6 billion, according to statistics released by the Namibia Statistics Agency (NSA).
Namibia’s import bill averaged N$10.6 billion between January 2022 to November 2022. In November 2022, Namibia imported goods worth N$10.5 billion, and exported goods worth N$8.9 billion. This led to a trade deficit of N$1.6 billion.
According to Simonis Storm, global oil prices, a weaker Rand exchange rate and higher commodity prices inflated the import bill. The continuous outflow of capital as Namibia records consistent trade deficits could weigh on foreign currency reserves and so the ability to maintain the currency peg. Especially since the main factor boosting reserves in 2021 were loans received from the IMF and African Development Bank. This might prompt Bank of Namibia to equalise their repo rate to that in South Africa later in the year in order to maintain a healthy import cover level and avoid a deterioration in the balance of payments, Simonis pointed out.
At the last monetary policy announcement in 2022, the Bank of Namibia increased the repo rate by 50 basis points to 6.75%, deviating from the South African Reserve Bank’s (SARB’s) 75 basis points hike to 7%. The prime lending rates in the two countries are on par at 10.5%.
The SARB’s Monetary Policy Committee (MPC) meeting for 2023 is scheduled to take place on 26 January, while the Bank of Namibia’s monetary policy announcement is expected to take place on 15 February.
Products
The top five commodities imported into Namibia collectively accounted for 26.2% of total imports. Petroleum oils topped the list of imported goods for the month of November 2022, with a share of 14.6% of the nation’s total import value.
In second position was motor vehicles for the transportation of goods with a share of 4.1%, while miscellaneous chemical products; and alcoholic beverages were rated third and fourth in the list accounting for 3.0% and 2.3% of all commodities imported, respectively. Finally, telecommunications equipment was ranked fifth after contributing 2.2% to the total imports, NSA said.
“Our expectation for commodity prices to decrease until mid-2023 should lead to vehicle, alcoholic and equipment prices to either decrease or remain relatively stable. Together with a stronger Rand exchange rate that we forecast for 2023, we might see the value of the import bill lower in coming months. Flat and high single growth rates forecasted for fishing and mining in 2023 should also be supportive of export growth,” Simonis Storm said
“However, we do expect Namibia’s trade balance to remain in deficit territory for most of 2023.”Risks to a lower import bill include China’s economic reopening expected in the second half of 2023 which could increase demand for commodities and so increase global oil prices as well, as factory production resumes. OPEC artificially lowering global supply of oil could also be a risk to higher oil prices later in 2023 and so inflate Namibia’s oil imports, Simonis Storm [email protected]
Namibia’s import bill averaged N$10.6 billion between January 2022 to November 2022. In November 2022, Namibia imported goods worth N$10.5 billion, and exported goods worth N$8.9 billion. This led to a trade deficit of N$1.6 billion.
According to Simonis Storm, global oil prices, a weaker Rand exchange rate and higher commodity prices inflated the import bill. The continuous outflow of capital as Namibia records consistent trade deficits could weigh on foreign currency reserves and so the ability to maintain the currency peg. Especially since the main factor boosting reserves in 2021 were loans received from the IMF and African Development Bank. This might prompt Bank of Namibia to equalise their repo rate to that in South Africa later in the year in order to maintain a healthy import cover level and avoid a deterioration in the balance of payments, Simonis pointed out.
At the last monetary policy announcement in 2022, the Bank of Namibia increased the repo rate by 50 basis points to 6.75%, deviating from the South African Reserve Bank’s (SARB’s) 75 basis points hike to 7%. The prime lending rates in the two countries are on par at 10.5%.
The SARB’s Monetary Policy Committee (MPC) meeting for 2023 is scheduled to take place on 26 January, while the Bank of Namibia’s monetary policy announcement is expected to take place on 15 February.
Products
The top five commodities imported into Namibia collectively accounted for 26.2% of total imports. Petroleum oils topped the list of imported goods for the month of November 2022, with a share of 14.6% of the nation’s total import value.
In second position was motor vehicles for the transportation of goods with a share of 4.1%, while miscellaneous chemical products; and alcoholic beverages were rated third and fourth in the list accounting for 3.0% and 2.3% of all commodities imported, respectively. Finally, telecommunications equipment was ranked fifth after contributing 2.2% to the total imports, NSA said.
“Our expectation for commodity prices to decrease until mid-2023 should lead to vehicle, alcoholic and equipment prices to either decrease or remain relatively stable. Together with a stronger Rand exchange rate that we forecast for 2023, we might see the value of the import bill lower in coming months. Flat and high single growth rates forecasted for fishing and mining in 2023 should also be supportive of export growth,” Simonis Storm said
“However, we do expect Namibia’s trade balance to remain in deficit territory for most of 2023.”Risks to a lower import bill include China’s economic reopening expected in the second half of 2023 which could increase demand for commodities and so increase global oil prices as well, as factory production resumes. OPEC artificially lowering global supply of oil could also be a risk to higher oil prices later in 2023 and so inflate Namibia’s oil imports, Simonis Storm [email protected]
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