Apart from metal prices, the index’s gains were based on an increase in new business registrations (90 in January), a steady rise in the Local Index of the Namibian Stock Exchange, and a further depreciation in the Namibia dollar against the Euro.
However, the latest results should be interpreted with some caution, said the Institute of Public Policy Research (IPPR), which produces the index, said.
Firstly, while the depreciation of the Namibia dollar against major currencies helps exporters, it increases the costs of imports, of which fuel remains a key commodity.
Secondly, the latest data appears to confirm that local economic conditions remain subdued. The rise in the annual inflation rate for January 2008 to 7.8% (from 7.1% in December 2007) dragged the Consumption Index into negative territory. In addition, it appears that consumers are feeling the impact of high interest rates as vehicles sales have now declined for four consecutive months. Growth in credit extension was negligible in both December and January.
“Altogether, this once again confirms that prospects for the business climate remain uncertain if not gloomy for the rest of the year, particularly when considered in the context of recent flooding and the power crisis in neighbouring South Africa, on which Namibia relies for most of its electricity imports,” says the IPPR.