Africa-Press – Namibia. MANY Namibians are feeling the financial pinch brought on by continuously increasing food and fuel prices.
According to local equities company Simonis Storm Securities, inflation will consistently come in higher for the year as it forecasts inflation to edge up to 7.1% for 2022.
“Globally, services inflation is on the rise as consumers switch to travel and tourism amongst other services as the world learns to live with the virus. However, locally, we expect goods inflation to be higher than services inflation as a result of expensive supply chains, elevated fuel prices and a weaker Rand exchange rate. We expect to see inflation consistently coming in higher than 5% in the coming months. We maintain our forecast of 7.1% for 2022,” Theo Klein, economic analyst at Simonis Storm, said.
Annual inflation was recorded at 5.4% y/y in May 2022, compared to 5.6% in the prior month. Goods inflation stood at 7.1% in May 2022 (compared to 7.4% in the prior month) and services inflation at 3.1% in May 2022 (same as the prior month). YTD, inflation averages 4.9% compared to 3.2% during the same period last year.
Brent crude prices have increased over 60% in the last 12 months, coupled with a weak Rand.
“We do expect fuel prices to remain on an upward trajectory in coming months,” Klein said.
He added that the current implied under-recovery in South Africa indicates a fuel price increase of R2.00/litre in July.
“Should the South African government not extend their levy reduction, fuel prices could increase up to R3.50/litre. Namibia can therefore also expect a fuel price increase of a similar magnitude and if the government does not extend the levy reduction, local fuel prices could increase by more than N$3.00/litre in July 2022. This will take local fuel prices closer to our initial forecasts ranging between N$23/litre to N$25/litre,” Klein said.
He added that a crucial risk to local fuel prices remains the eventual removal of lockdown restrictions in China.
“This could potentially provide a second global oil price shock and filter through to higher fuel prices in Namibia as discussed in our report on the Chinese economic slowdown released in May 2022. The transport category reached an all-time high of 18.9% in April 2022. Whenever transport inflation was above 10%, Namibia had headline inflation rates close to 6%. Therefore, we maintain our view that headline inflation will likely edge closer to 6% in coming months,” Klein said.
The equities firm further said that certain Northern African and Middle Eastern countries are already in a food crisis, and with rising food prices and no end in sight to the war in Ukraine, risks of mass migration and social unrest rise in these regions.
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