Economists still hoping for lower inflation in 2023

Cooking oil, children’s shoes, motorcycles and honey are some of the products that cost less in August, compared to the same period last year.

Economists, however, believe with oil prices expected to increase again, the prices of many items will remain elevated.

The price of cooking oil has lowered by 13,1%, children’s shoes by 2%, motorcycles by 1,7%, and honey by 1,3%.

These are not the only goods which saw reduced prices. Services such as home renovations and maintenance also saw prices dipping by 3,3% during August.

Food prices, which normally drives up inflation, saw watermelons, maize, and bananas going down, while the price of cabbage shot up by 50%.

It is not clear why cabbage increased in price, however, the country’s borders were closed by the Namibia Agronomic Board for August, which normally signals an oversupply and relatively easy prices.

The inflation print for August was at 4,7% – a bit shy of the 16th-lowest month figure of 4,5% recorded in July.

This again shows prices are generally rising.

According to the Namibia Statistics Agency, which releases inflation data, the annual inflation rate was better in August this year, compared to 7,3% witnessed in August 2022.

Alex Shimuafeni, the bureau’s chief, says the main contributors to the annual inflation rate in August 2023 were food and non-alcoholic beverages, alcoholic beverages and tobacco, housing, water, and electricity, and gas and other fuels.

On a month-on-month basis, the inflation rate for August 2023 was 0,4% compared to the 0,3% registered during the preceding month.

While the average annual inflation rate was rather stable, the annual inflation rate for goods was estimated at 5,8% and at 3,1% for services.

In August, the central bank indicated it expects overall inflation to average 5,6% in 2023.

Year to date for the August print average inflation is still above the central bank’s projection at 6%, meaning investments should return at least 6%, and add some wealth to those engaged in economic activity.

Commenting on the print release, Gerrit van Rooyen of Oxford Economics says the average inflation rate during the first eight months of 2023 was 6%, which is already high compared to 5,6% during the same period last year.

“However, inflation has fallen markedly from 7% at the start of the year. Food price pressures have dissipated this year in line with the decline in global food prices, especially maize prices, but the costs of imported food face some upward pressure from the volatile Namibia dollar exchange rate,” he says.

Van Rooyen says the transport price index has also descended into deflationary territory thanks to base effects and the decline in the global oil price relative to last year.

“However, petrol prices were raised by N$1,2/? in September, and we expect the elevated global oil price and domestic currency weakness will cause a reacceleration in transport prices in the last quarter of 2023.”

Based on the above factors, coupled with weaker domestic demand and tight monetary policy, Van Rooyen said he forecasts the inflation rate to moderate to 5,7% this year from 6,1% in 2022.

Email: lazarus@namibian.com.na
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Selected inflation rates for common goods and services during August 2023:
ν Package holidays 96,5%

ν Milk, cheese and eggs 16,2%

ν Insurance 15,8%

ν Bread and cereals 11,6%

ν Accommodation services 9,2%

ν Alcoholic beverages 8,4%

ν Cars 7,6%

ν Catering (weddings and events) 6,6%

Source: NSA