Economists predict repo rate cut

Economists are predicting a repo cut of 25 basis points today as the Bank of Namibia (BoN) will be making its first announcement for 2025.

This will bring the repo rate to 6.75%.

During the last repo rate announcement, the BoN reduced its repo rate by 25 basis points to 7%.

Economist Omu Kakujaha-Matundu says the central bank will make this decision based on the current inflation amount.

“All indications are that the BoN is going to reduce the repo rate by 25 basis points, which is 0.25%. The main consideration for the BoN will be the inflationary outlook,” he says.

This means loan repayments would become cheaper.

Kakujaha-Matundu says economic growth in the country has been slow and a repo rate cut will boost activity.

“The high unemployment rate and sluggish economic growth demands a lowering of the repo rate to stimulate the economy,” he says.

However, this has to be done in conjunction with a change in fiscal policy.

This means increasing the national budget for 2025, as well as the development budget, he says.

“To adequately stimulate the economy, monetary policy should work in tandem with fiscal policy.

Thus, there is a need for an expansionary fiscal budget,” Kakujaha-Matundu says.

Additionally, the economist predicts no increased inflation rate for the first six months of the year, primarily due to external factors.

“Considering the current inflation rate, geopolitical tension, Trump’s tariff war, the oil price and the strength of the Namibia dollar, I don’t see inflation increasing in the first and second quarter of this year,” he says.

Another economist, Josef Sheehama, says unless there is a shift in the macroeconomic factors, the BoN will cut the repo rate by 25 basis points.

“Although South Africa and Namibia differ by 75 basis points, I expect the BoN to cut the repo rate by 25 basis points in February 2025, maintaining the interest rate and safeguarding the currency peg,” he says.

Sheehama says this is because the inflation rate has been below 4%, presenting an opportunity for some relief for businesses and consumers.

“Living costs are still very high, despite the fact that inflation has decreased.

“If the BoN lowers its interest rate, it will surely improve business prospects in the coming months as consumer and business confidence rises.”

– email:shania@namibian.com.na

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