Consumers face high interest rates, prices
Cost of living continues to escalate
The Bank of Namibia increased the repo rate from 4.0% to 4.25%.
The increase in food and fuel prices, coupled with rising interest rates, are expected to put a further burden on consumers budgets, especially the low-income segment of the society.
The Bank of Namibia (BoN) decided to increase the repo rate by 25 basis points (bps) from 4.0% to 4.25%. The means the prime lending rate for local commercial banks will also increase from 7.75% to 8.0%.
In February, the repo rate also increased by 25 basis points. Consumers can thus expect high repayments on home and car loans.
According to the central bank governor Johannes !Gawaxab, the decision to increase the repo rate is appropriate to safeguard the one-to-one link between the Namibia Dollar and the South African Rand, while meeting the country's international financial obligations.
In addition, the bank is also mindful of the need to counter the build-up of inflationary pressures in the economy before it gets worse.
Inflation averaged 4.5% during the first two months of 2022, compared to 2.7% in the corresponding period of 2021. The rise in inflation was mainly driven by an increase in transport inflation, on account of a rise in international oil prices.
From 3.6% registered in 2021, Namibia's overall inflation is now projected to average around 6.0% for 2022, from the 4.4% projected earlier, !Gawaxab said.
Although overall inflation remains within a reasonable range, its food and transport components are expected to remain elevated, he added.
Credit
The increase in interest rates will make borrowing expensive and will thus impact credit uptake by the private sector.
“Although still subdued, growth in private sector credit (PSCE) increased slightly to 2.8% during the first two months of 2022, higher than the 2.0% registered during the same period in 2021.”
The marginal rise in PSCE growth was due to increased credit demand by both businesses and individuals. Since the last MPC meeting, year-on-year growth in PSCE increased to 2.8% in February 2022 from 1.2% recorded in December 2021, mainly supported by increased demand by businesses, especially corporates in the fishing and financial services sectors, he added.
!Gawaxab noted that real gross domestic product (GDP) rebounded to 2.4% in 2021 compared to a contraction of 7.9% in 2020.
This monetary policy stance is a step towards normalising the current negative real interest rate environment and establishing a positive real interest rate that is conducive to long-term economic growth, !Gawaxab said.
Positive real interest rate will encourage savings as there will be higher returns. Those savings can then be used to invest in different sectors of the economy to stimulate growth in the [email protected]
The Bank of Namibia (BoN) decided to increase the repo rate by 25 basis points (bps) from 4.0% to 4.25%. The means the prime lending rate for local commercial banks will also increase from 7.75% to 8.0%.
In February, the repo rate also increased by 25 basis points. Consumers can thus expect high repayments on home and car loans.
According to the central bank governor Johannes !Gawaxab, the decision to increase the repo rate is appropriate to safeguard the one-to-one link between the Namibia Dollar and the South African Rand, while meeting the country's international financial obligations.
In addition, the bank is also mindful of the need to counter the build-up of inflationary pressures in the economy before it gets worse.
Inflation averaged 4.5% during the first two months of 2022, compared to 2.7% in the corresponding period of 2021. The rise in inflation was mainly driven by an increase in transport inflation, on account of a rise in international oil prices.
From 3.6% registered in 2021, Namibia's overall inflation is now projected to average around 6.0% for 2022, from the 4.4% projected earlier, !Gawaxab said.
Although overall inflation remains within a reasonable range, its food and transport components are expected to remain elevated, he added.
Credit
The increase in interest rates will make borrowing expensive and will thus impact credit uptake by the private sector.
“Although still subdued, growth in private sector credit (PSCE) increased slightly to 2.8% during the first two months of 2022, higher than the 2.0% registered during the same period in 2021.”
The marginal rise in PSCE growth was due to increased credit demand by both businesses and individuals. Since the last MPC meeting, year-on-year growth in PSCE increased to 2.8% in February 2022 from 1.2% recorded in December 2021, mainly supported by increased demand by businesses, especially corporates in the fishing and financial services sectors, he added.
!Gawaxab noted that real gross domestic product (GDP) rebounded to 2.4% in 2021 compared to a contraction of 7.9% in 2020.
This monetary policy stance is a step towards normalising the current negative real interest rate environment and establishing a positive real interest rate that is conducive to long-term economic growth, !Gawaxab said.
Positive real interest rate will encourage savings as there will be higher returns. Those savings can then be used to invest in different sectors of the economy to stimulate growth in the [email protected]
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