By Hilary Mare
A report released by First Capital Limited has dismissed possibilities of a single digit food price inflation range saying that food price inflation will remain above 10 percent in the first two quarters of 2017 and trend marginally below 10 percent in the last two quarters of 2017.
Titled first capital food price monitor and fronted by economist Milner Siboleka, the report also sees price reductions by Namib Mills as insufficient to bring food price inflation down.
“We believe that the price decline in domestically produced cereals by Namib Mills will be insufficient to bring food inflation within single digits given the limited weight of such goods on the shopping basket of consumers and the increase on other products that could offset the price relief on domestic cereals. The decline in prices will be mainly influenced by cereals like maize meal, macaroni, spaghetti and rice due to the implementation of the price relief by Namib Mills as producers of cereal goods a decision we believe will translate to lower retail prices of such cereals.
“Milk prices could also decline as we anticipate production to increase on account of improving livestock conditions. However, we anticipate meat prices to increase for at least another year as farmers restock livestock and limit supply,” said Siboleka.
The annual inflation on food has since July last year edged to positive inflation numbers after a prolonged deflation due to excess supply. Contrary to the previous trend of domestic inflation trending higher while international prices kept falling on annual basis, the trend of international price movements since late 2016 has matched the domestic price inflation.
It is not however surprising that Namibia’s domestic inflation now First Capital Food Price Monitor follows the trend of international price movements given the stable exchange rate throughout 2016 that indicates a period of minimum exchange rate shock effects on inflation. However, the upward trend of international food commodity prices poses upside risks on domestic inflation.
In the region, Namibia’s inflation mirrors that of South Africa, a case not surprising given that the country imports its inflation from South Africa through the more than 50 percent of goods that are imported for consumption. However, though inflation differs across the region with Zambia having high levels and Botswana recording the lowest, the trend looks almost similar.
First Capital food price index for January 2017 which depicts the price movements of a basket of food items increased to 113.8 from 112.5 in December 2016 indicating an increase of 1.3 percent in the general price of a food basket (m/m) used to measure food prices. On an annual basis, the price index increased by 12.7 percentage points from the 101.1 price index recorded for January 2016 to 113.8 in January 2017.
This implies that food prices surged by 12.7 percent in January compared to prices in January 2016. Furthermore, the annual inflation of 12.7 percent for January is higher than 12.5 percent recorded in December. Similarly the m/m inflation of 1.3 percent recorded in January is higher than 0.9 percent in December.
“This increase in the FC food basket reflects the continued rise in cost of living in Namibia which has dare consequences on the poor who spend a sizable share of their incomes on food consumpt i on ,” said Siboleka.
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