Namibia is likely to see at least two interest rate hikes in 2022, economic analysts who spoke to The Brief have advised.
This is despite the fact that the Bank of Namibia (BoN) last December resolved to keep the repo rate unchanged at 3.75%.
Cirrus Capital’s Head of Research Robert McGregor said there are high chances the central bank will increase the repo rate at least twice this year.
“We are currently expecting two repo rate hikes this year. While there is increasing rhetoric about the rate hiking cycle, particularly from the US Fed, we expect this will be slower than many anticipate – both abroad and closer to home. Regionally, we believe there will be some pressure to hike but that this will be tempered by the fragile economic recovery and central banks will want to keep a closer eye on the data. Although the SARB hiked in November 2021, we think they will initially hold off to assess the data on growth, credit extension and inflation in the wake of the Omicron response,” he said.
Simonis Storm Economist Theo Klein forecasts BoN to hike its repo rate by between 50 and 75 basis points in 2022, taking the prime rate to between 8.00% and 8.25% amid an expected hike by the South African Reserve Bank.
“Given the expectation of interest rate hikes in the US and according to the South African Reserve Bank’s (SARB’s) Quarterly Projection Model (QPM), we expect the SARB to hike between 75 and 100 basis points by the end of 2022. Following suit, we see Bank of Namibia hiking its repo rate by between 50 and 75 basis points in 2022. Interest rates in Namibia have therefore bottomed out and will increase going forward.”
PSG Namibia’s Shelly Louw expects at least three interest rate hikes of 25 basis points each in 2022, with two of those hikes being in the 1st quarter of 2022.
“In November 2021 the South African Reserve Bank (SARB) hiked the repo rate by 25bps due to increasing inflation levels, a move which the Bank of Namibia (BoN) did not follow as inflation in Namibia is lower than in South Africa. Thus, Namibia is behind on the interest rate front as the BoN typically prefers to keep rates higher than in South Africa by about 25bps (currently both Namibia and South Africa’s repo rates are at 3.75%). Traditionally, the BoN maintains a moderate positive differential to its South African counterpart in order to lure portfolio inflows. For this reason, there may be cause for more than three hikes in Namibia in 2022,” Louw said.
The South African Reserve Bank in November raised its repo rate by 25 basis points, to 3.75%, the first-rate hike in three years.
Namibia’s repo rate is currently on par with South Africa.
