Namibia Central Bank Maintains Repo Rate and Key Forecasts Unchanged
The Bank of Namibia has announced its decision to keep the repo rate and key forecasts unchanged, as the country continues to grapple with the economic impact of the global pandemic. The repo rate, which is the rate at which commercial banks borrow money from the central bank, will remain at 3.75%.
The bank's Monetary Policy Committee (MPC) stated that the decision was made in order to support economic growth while ensuring price stability. It highlighted that despite some positive signs of recovery in certain sectors, the overall economic outlook remains uncertain due to ongoing challenges posed by the COVID-19 pandemic.
The Namibian economy experienced a sharp contraction in 2020, with real GDP shrinking by 7.3% due to disruptions in various sectors such as tourism, mining, and manufacturing. This prompted the central bank to implement measures to address the adverse impacts and support economic recovery efforts.
In its statement, the MPC noted that the lifting of international travel restrictions and the progress in global vaccination campaigns provide some hope for the recovery of the tourism sector, which is a crucial source of foreign exchange earnings for Namibia. However, it stressed that uncertainties surrounding new COVID-19 variants and the pace of global economic recovery still pose risks to the sector.
Moreover, the bank acknowledged the challenges faced by households and businesses, particularly in terms of income and employment. It emphasized the importance of continued support and effective implementation of fiscal and monetary policy measures to mitigate these challenges and stimulate economic activity.
Regarding inflation, the MPC maintained its inflation forecast at 3.7% for 2021, within the bank's target range of 3%-6%. It mentioned that inflationary pressures are expected to be relatively contained, supported by the stability in food prices and the subdued domestic demand.
The central bank reaffirmed its commitment to maintaining price stability and ensuring a stable and sustainable financial system in Namibia. It called for continued cooperation between monetary and fiscal authorities, as well as other relevant stakeholders, to navigate the current economic challenges and facilitate a robust recovery.
In conclusion, the Bank of Namibia's decision to keep the repo rate and key forecasts unchanged reflects its cautious approach towards supporting economic growth amidst ongoing uncertainties. The bank remains focused on maintaining price stability and providing the necessary support for a resilient recovery in the face of the challenges posed by the COVID-19 pandemic.
