Africa-Press – Namibia. ECONOMIC analysts have predicted a tough time ahead for Namibians following a sharp fuel price increase this week.
Fuel prices went up by more than a dollar for both petrol and diesel on Tuesday at midnight. Simonis Storm Securities economist Theo Klein says the rising fuel prices will put pressure on the price of basic household commodities.
“If we look at the Namibian consumer price index, transport is averaging about 14% of the basket. That means on average a household spends 14% of their salary on transport in that category.
“Petrol and diesel prices are big components of that, with local fuel prices that increased with 45% over the last 12 months. We expect household budgets to be under further pressure,” he says.
First National Bank group economist Ruusa Nandago attributes the fuel price increases to the ongoing international market price instability. “As an importer of oil, Namibia is a price taker of global oil prices, given that global oil prices have surpassed the US$100/barrel mark for the first time since 2014,” she says.
She says the increases will most likely put pressure on inflationary trends in the country. “This will be passed on through higher domestic fuel prices for both petrol and diesel as we have seen with this month’s fuel price increase. Higher fuel prices will add to already rising inflation given that fuel is an input of most production processes,” she says.
Nandago says rising fuel prices are likely to impact the majority of items in the national consumer basket. “Food makes up about 34% of total household consumption, therefore rising food prices will add pressure to households’ spending power, thus reducing the ability to spend on other goods and services. This will lead to lower demand in the broader economy, which may reduce business revenues and VAT collections by the government,” she says.
Agribank’s senior research and production development officer, Indileni Nanghonga, says the increase in fuel will have a ripple effect extending to farmers and the logistics sector.
“Further increases in petrol prices have a negative impact on the cost of production, resulting in final price inflation pressure on the end consumer. Household disposable income reached a peak of N$77 035 in 2019 and stagnated in 2020, owing to a loss of jobs and a lack of salary increases amid rising costs,” she says.
Nanghonga says the current situation is reminiscent of 2021, and some parts of this year which have seen business confidence subdued by the Covid-19 pandemic.
She says Namibia also saw household debt-to-disposable income reaching 79,9% in 2020, further stifling consumers’ confidence and spending ability. “The declining disposable income amid rising costs of living will put pressure on the end consumer.
“Fuel-dependent industries are likely to increase costs, which will in the end be transferred to the end consumer. Food prices have already been increasing and will continue to increase as logistics costs rise due to inflation,” she says.
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