Bank of Namibia - Monetary Policy Committee increased repo rate by 25 basis points to 7.25 percent

ECONOMIC DEVELOPMENTS REPORT
As usual, reporting on economic developments was split into international and domestic components.
GLOBAL ECONOMY
1. Global real GDP growth slowed during 2022 and was expected to remain moderate in 2023. Global economic growth declined from 6.3 percent in 2021 to 3.4 percent in 2022.
2. The MPC noted that the global economy was projected to slow down further in 2023. The International Monetary Fund (IMF) had projected global economic activity to expand by 2.8 percent in 2023, as growth in the AEs and EMDEs was projected to remain weak. Specifically, growth in the AEs was expected to decline by half to 1.3 percent in 2023, from 2.7 percent in 2022.
3. Risks to global growth were reported to have remained on the downside, although adverse risks had slightly moderated.
4. The international price of Brent crude oil declined, on average, both monthly and annually in March 2023. The price of Brent crude oil declined by 0.2 percent, month- on-month, and
5. Likewise, uranium and gold prices fell, on average, in March 2023 compared to the previous month and the corresponding month in 2022.
6. The MPC was informed that the prices of copper and zinc had also declined monthly and yearly in March 2023.
7. The global food price index and the Diamond Index (IDEX) declined both monthly and yearly in March 2023.
8. Since the last MPC meeting, inflationary pressures in the monitored economies moderated but remained elevated.
9. Finally, it was noted that the market turmoil, which resulted from the collapse of the Silicon Valley and Signature Banks, had been largely contained.
10. The MPC noted the recent global economic developments as presented.
11. The MPC noted that domestic economic activity improved during 2022 relative to 2021.
12. The inflation rate accelerated over the first three months of 2023 relative to the corresponding period in 2022.
13. The MPC was informed that the annual growth in Private Sector Credit Extension (PSCE) declined.
14. The MPC was also informed that total Government debt stock increased over the year to the end of March 2023.
15. It was reported that Namibia’s merchandise trade deficit narrowed over the first two months of 2023, as exports rose faster than imports.
16. The MPC was further informed that the stock of international reserves remained sufficient to support the currency peg and meet the country’s international financial obligations.
17. The MPC noted the recent developments in the domestic economy as presented and deliberated.
18. The MPC deliberated on both global and domestic economic developments, as highlighted above.
19. After considering the developments in all key macroeconomic variables as reflected above, the MPC agreed to increase the Repo rate.The MPC discussed the benefits, costs and risks of a 25 basis point and a 50 basis point increase, and then decided to increase the Repo rate by 25 basis points to 7.25 percent. The increase in the Repo rate effectively brought the prime lending rate to 11.00 percent. The decision was taken to contain inflationary pressures, stem their second-round effects and anchor inflation expectations. The decision was also deemed appropriate to safeguard the one-to-one link between the Namibia Dollar and the South African Rand. Moreover, this monetary policy stance would take the previously negative real Repo rate to a positive rate. The increase in the rate was nevertheless of moderate proportion to support the domestic economic recovery.

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