Namibia central bank leaves key rate unchanged, sees economic recovery



Namibia central bank leaves key rate unchanged, sees economic recovery

Windhoek, Namibia (PANA) - Namibiaā?s central bank has left its benchmark rate steady at 7 percent and said indicators in the domestic economy were showing sig n s of recovery, particularly the diamond and uranium dominated mining sector.

Bank of Namibia (BoN) governor Tom Alweendo said Wednesday that inflation, which fell to 7.5 percent in July from 9.1 percent in June, was expected to continue easing in the medium term, but warned of upside risks in th e longer term inflation outlook, which may be triggered by the revival of the global economy and price pressures from higher commodity prices.

Namibia has so far slashed its key lending rate by 350 basis points to help boos t flagging growth. Analysts believe the central bank will not cut the rate below

7 percent.

Namibiaā?s inflation rate has declined from around 10 percent in February this year.

Alweendo said Namibia had managed to weather the economic storm, adding that the re were ''green shoots'' of economic recovery.

ā?We have managed to weather the storm - yes we have lost jobs but other econom ies have gone through worseā¦ By and large I can say that we have been able to withstand the crisis,ā? Alweendo said.

In June, the central bank said Namibiaā?s economy would contract by 0.6 percent in 2009, hit by a global downturn which has slashed demand for its mineral prod u cts.

Diamond production, which has anchored economic growth in the country, will shri nk by 63 percent while tourist arrivals are expected to slump by nearly 30 perce n t.

While maintaining a cautious approach to growth prospects in the remaining two q uarters, Alweendo said the worst appears to be over.

ā?We are cautiously optimistic about growth in the medium term but there is a lot of growth coming from the mining sector and in the diamond sector sales have

started picking up again. We are however still worried about the tourism sector which depends on the external environment,ā? said BoN head of research John Steytler.

ā?There are green shoots of recovery in the Namibian economy, we have seen an i mprovement in diamond and uranium mining,ā? Steytler said.

Namibia is Africaā?s biggest uranium producer and a big diamond producer.

BoN said that there was a noticeable increase in the volumes of diamonds markete d during the second quarter of the year.

ā?In particular the volumes of diamonds exported witnessed a remarkable recover y during the second quarter of 2009,ā? it said.

Uranium output declined slightly, however, due to maintenance work at some of th e countryā?s mines.

The central bank also said that there are signs of a strengthening in domestic d emand indicators such as mortgage credit, number of vehicles sold and the constr u ction sector.

Windhoek - 19/08/2009

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