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Inflation forecast for 2012 remains unchanged

Inflation forecast will remain unchanged for the year, says Daniel Motinga, senior manager of research and development at First National Bank. According to Motinga, inflation forecast for 2012 remains at 7.1%, with food and transport still the main drivers of inflation as a direct consequence of the resilience in global commodity prices, specifically oil.
“We envisage further hikes in fuel prices over 2012,” he said.
On the other hand, the ‘Namibia Macro-economic Outlook 2011-2012’ report by Investment House Namibia forecast local inflation to rise and end the year at 6.2% year on year.
“The inflation rate was expected to increase marginally during 2011, coming off the low base in 2010, to reach an average of 4.6% in 2011 (4.5% in 2010) with a year-end rate of 6.12%,” it states.
Like Motinga, the report states that food inflation, combined with transport inflation will remain robust.
Transport inflation accelerated by 2.5% month on month in January 2011, significantly higher than the increase of 1.3% in January 2010.
According to the Consumer Price Index data released by the Central Bureau of Statistics, the annualised inflation hovered around 5.3% in September, down marginally from 5.4% recorded in August 2011. The key reason was the marked deceleration in food inflation.
In other developments, Motinga estimates that it is too early to tell whether Bank of Namibia will change its repo rate.
He is of the view that rates will stay on hold for longer.
“Thus rates should stay at current levels for a significant part of this year. We do not think there is room for any rate cuts and therefore the only direction for rates is up,” he said.
But “depending on how the global environment pans out we can see risk of rates going up by at least 50 basis point in the final quarter of 2012,” he estimates.

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