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Inflation expected to surge – EAN The Namibian 17May2018

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03 Jul 2018

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THE Economic Association of Namibia has predicted that annual inflation could go up during the remainder of the year as a result of the price of maize products increasing, thus exerting upward pressure on food prices.

In a report on inflation for April 2018, Economic Association of Namibia research associate Klaus Schade said prices of maize are expected to increase on the Johannesburg Stock Exchange from the current N$2 085 to N$2 244 per tonne for white maize, and from N$2 178 to N$2 326 per tonne for yellow maize by December this year.

With the inflation rate for March at 3,5%, he said the 3,6% recorded in April 2018 shows an upsurge in the inflation rate, albeit small, and this could point to the trajectory for the rest of the year.

Schade further stated that the lower inflation rates, particularly in the second half of 2017, resulted in lower price levels. Therefore, the higher inflation rates expected over the next couple of months will result in higher prices.

Oil prices are also on the increase, for instance Brent oil spot prices averaged U$72,11 (N$885) per barrel in April 2018, the highest monthly average since November 2014 (U$79,44 (N$975) per barrel).

“Prices are expected to at least remain at this level, if not increase further, mainly due to the continuous supply cuts by Opec and non-Opec member states, and the withdrawal of the United States from the Joint Comprehensive Plan of Action with Iran and the looming reintroduction of sanctions.

“Increased oil production in the US owing to more favourable prices is not expected to level out these factors.

Higher oil prices will not only have a direct impact on transport inflation, but will ripple through the economy over time because of increased input costs for companies,” Schade said.

He reiterated that in a country with one of the highest income inequalities globally like Namibia, an average inflation rate is less useful than in countries with a more homogenous distribution of income.

Low-income households have different consumption patterns than middle or higher income households, as there is a need for them to satisfy their basic needs first.

“The calibration of additional inflation rates for low, middle and high income households would provide more detailed information that could for instance guide employers and trade unions during wage and salary negotiations, and result in settlements that more accurately reflect the rising costs of living of the different income groups.

“Furthermore, the government could base adjustments of the monthly social grants on the inflation rates for low income households, rather than on the average inflation,” the researcher said.

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