Namibia projects lower inflation via SA policy sync
Ogone Tlhage
The Bank of Namibia (BoN) expects inflation to decrease if the South African Reserve Bank (SARB) decides to change its monetary policy stance and set an inflation target of 3%, according to its governor, Johannes !Gawaxab.
!Gawaxab shared the findings following a monetary policy simulation conducted based on the SARB’s stance.
“As the BoN, we carried out an internal analysis to quantify the impact of such a change on Namibian variables. What we see largely on the benefits side is price stability, while on the cost side, there will be output losses for us. If you have a lower inflation outcome, you probably have good investment and good growth in the country,” !Gawaxab said of BoN’s simulation findings.
“On the cost side, usually in the form of output losses that are linked to keeping the interest rate higher to reduce inflation, we, however, did not find evidence that interest rates have to be kept higher to achieve that target,” he added.
Headline inflation was expected to decrease over two years, !Gawaxab said.
Based on the simulation, “it will lead to lower and more stable inflation. Headline inflation will lower by about 1.5 percentage points by 2028, compared to the baseline. What we need to do to achieve this is to administer price inflation, as it would be the same in South Africa,” he said.
Interest rates are expected to rally by 1.5 percentage points by 2029, due to lower inflation, debt-to-gross domestic product ratios, and gross financing increases due to lower GDP.
The Bank of Namibia (BoN) expects inflation to decrease if the South African Reserve Bank (SARB) decides to change its monetary policy stance and set an inflation target of 3%, according to its governor, Johannes !Gawaxab.
!Gawaxab shared the findings following a monetary policy simulation conducted based on the SARB’s stance.
“As the BoN, we carried out an internal analysis to quantify the impact of such a change on Namibian variables. What we see largely on the benefits side is price stability, while on the cost side, there will be output losses for us. If you have a lower inflation outcome, you probably have good investment and good growth in the country,” !Gawaxab said of BoN’s simulation findings.
“On the cost side, usually in the form of output losses that are linked to keeping the interest rate higher to reduce inflation, we, however, did not find evidence that interest rates have to be kept higher to achieve that target,” he added.
Headline inflation was expected to decrease over two years, !Gawaxab said.
Based on the simulation, “it will lead to lower and more stable inflation. Headline inflation will lower by about 1.5 percentage points by 2028, compared to the baseline. What we need to do to achieve this is to administer price inflation, as it would be the same in South Africa,” he said.
Interest rates are expected to rally by 1.5 percentage points by 2029, due to lower inflation, debt-to-gross domestic product ratios, and gross financing increases due to lower GDP.
