BoN: No rate change – 2004 looks good

BoN: No rate change – 2004 looks good

THE REAL Gross Domestic Product of Namibia in 2004 is expected to grow by 3,8 per cent from an estimated 3,2 per cent in 2003, according to the Bank of Namibia (BoN).

Last week, the central bank released a monetary policy statement reviewing the last quarter of 2003 when it kept the current bank rate unchanged at 7,75 per cent. This follows the South African Reserve Bank’s announcement that its repo-rate would also remain unchanged.BoN expects the Namibian economy to strengthen during 2004, “…driven largely by the good performance of the mining sector – mainly as the result of an increase in diamond and zinc production.Other sectors such as fishing and services (tourism, retail, transport and telecommunications) are also expected to grow moderately.”The private sector increased by 4,9 per cent in the fourth quarter of 2003, “…and it is also expected to continue growing moderately,” the central bank said.According to BoN, important challenges to be addressed by its monetary policy stance of supporting this growth, included ensuring credit to the private sector, maintaining sufficient foreign reserves, and, “…more importantly, ensuring low and stable inflation.”BoN noted the steady drop in local inflation rates experienced throughout 2003.Factors it lists as influencing inflation are exchange rates, credit extensions by banks, exogenous factors and reserves.The steady appreciation of the South African Rand – and likewise the Namibia Dollar – against major foreign currencies in 2003 dominated the exchange rate’s influence on Namibian inflation.”The strengthening of the domestic currency has been the main factor responsible for the low inflation, while lower food prices also contributed,” said the central bank.As for credit extension, BoN said, “the fourth quarter performance was better compared to the average growth rate of 15,9 per cent recorded for the corresponding period of 2002, implying that private sector credit is still growing by a faster rate.”Private sector credit growth averaged 1,6 per cent for the last quarter of 2003.Exogenous factors include the looming drought in Southern Africa, which may effect food production this year as well as the decision by OPEC to reduce excess production of crude oil and trim its members’ output quotas by 1 million barrels a day, according to BoN.Reserves at BoN declined by nearly 8,08 per cent to N$2 billion in the last quarter of 2003.BoN said this was because of a net outflow of N$0.2 billion, with domestic funds moving abroad being attributed as mostly responsible for the reserve reduction.”However, the beginning of 2004 saw reserves increasing by 17,38 per cent to N$2,4 billion”, BoN pointed out, drawing similarities with the situation at the start of 2003.This follows the South African Reserve Bank’s announcement that its repo-rate would also remain unchanged. BoN expects the Namibian economy to strengthen during 2004, “…driven largely by the good performance of the mining sector – mainly as the result of an increase in diamond and zinc production. Other sectors such as fishing and services (tourism, retail, transport and telecommunications) are also expected to grow moderately.”The private sector increased by 4,9 per cent in the fourth quarter of 2003, “…and it is also expected to continue growing moderately,” the central bank said. According to BoN, important challenges to be addressed by its monetary policy stance of supporting this growth, included ensuring credit to the private sector, maintaining sufficient foreign reserves, and, “…more importantly, ensuring low and stable inflation.”BoN noted the steady drop in local inflation rates experienced throughout 2003. Factors it lists as influencing inflation are exchange rates, credit extensions by banks, exogenous factors and reserves. The steady appreciation of the South African Rand – and likewise the Namibia Dollar – against major foreign currencies in 2003 dominated the exchange rate’s influence on Namibian inflation. “The strengthening of the domestic currency has been the main factor responsible for the low inflation, while lower food prices also contributed,” said the central bank. As for credit extension, BoN said, “the fourth quarter performance was better compared to the average growth rate of 15,9 per cent recorded for the corresponding period of 2002, implying that private sector credit is still growing by a faster rate.”Private sector credit growth averaged 1,6 per cent for the last quarter of 2003. Exogenous factors include the looming drought in Southern Africa, which may effect food production this year as well as the decision by OPEC to reduce excess production of crude oil and trim its members’ output quotas by 1 million barrels a day, according to BoN. Reserves at BoN declined by nearly 8,08 per cent to N$2 billion in the last quarter of 2003. BoN said this was because of a net outflow of N$0.2 billion, with domestic funds moving abroad being attributed as mostly responsible for the reserve reduction. “However, the beginning of 2004 saw reserves increasing by 17,38 per cent to N$2,4 billion”, BoN pointed out, drawing similarities with the situation at the start of 2003.

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