Windhoek - Namibia’s foreign reserves for import cover are in a sound position, while inflation continues to recede despite the challenges posed by COVID-19 throughout most of this year.
In a Monetary Policy Statement this week, Bank of Namibia (BoN) Governor Johannes !Gawaxab maintained the lending rate at 3,75 basis points after noting that inflation declined to 2,2 percent in the first nine months of 2020 year-on-year.
!Gawaxab said Namibia's stock of international reserves stood at N$32,7 billion (approximately US$1,9 billion), equivalent to 4,9-months import cover.
“At this level, the reserves remain sufficient to protect the peg of the Namibian dollar to the South African rand, while meeting the country’s international financial obligations.
“On a monthly basis, the inflation rate increased to 2,4 percent in both August and September 2020, from 2,1 percent in July 2020. Overall inflation is projected to average 2,3 percent in 2020.”
He continued, “Domestic economic activity slowed during the first eight months of 2020, compared to the same period of 2019. The contraction was mainly reflected in sectors such as mining, manufacturing, tourism, wholesale and retail trade as well as transport and storage.
“On the contrary, activity in the telecommunication and local electricity generation subsectors improved during the same period. Going forward, the domestic economy is projected to contract by 7,8 percent in 2020 (under the baseline scenario) before a moderate recovery of 2.1 percent in 2021.”
According to the BoN chief, global real GDP contracted in the second quarter of 2020.
“Going forward, the International Monetary Fund now projects a contraction of 4,4 percent for the global economy in 2020 as a whole. This is an upward revision from -5,2 percent projected earlier in the June 2020 World Economic Outlook. In 2021 the global economy is expected to improve to a positive growth rate of 5.2 percent,” he said.
!Gawaxab added that key risks to the global outlook include possible new waves of COVID-19 infections in some regions, slower progress with the development and rollout of vaccines, as well as US-China trade tensions.
“Commodity prices declined in September 2020 compared to the previous month, except for copper which increased slightly. Stock market performances were volatile, partly reflecting the uncertainties regarding additional fiscal support in the US, the upcoming US election, and the surge in new COVID-19 cases globally,” he said.
He maintained his position that Namibia would witness moderate recovery in 2021, adding that authorities would continue to monitor global trends and make sober policy decisions.