Namibia worries about inflation.

Namibia's high per capita income in relation to other African countries (see chart below) reflects the success of its extractive industries as opposed to the strength of its consumer base. In fact, Namibia has one of the biggest income gaps in the world.

For example, one authoritative source, the CIA's World Factbook, estimates that half the population is engaged in subsistence farming.

For its small consuming middle class, however, recent years have meant positive improvements. In its review of Namibia's economic prospects for 2007, released in February 2007, the Bank of Namibia (BoN) said that private consumption would grow 3.9 percent in 2007 compared with 3.8 percent in 2006. The BoN said the growth was due to salary increases.

These salary increases, and rising oil and food prices, are contributing to worries about inflation. According to a report in The Namibian (Windhoek) on July 3, 2007, the rate of inflation increased to 7.1 percent in May 2007. The newspaper added, "Inflation which has [been] on [an] upward trend since last year, reached an average of 6.1 per cent during the first quarter of this year, compared to an average four per cent registered during the corresponding quarter of 2006."

In response to these inflationary pressures, in June 2007 the BoN raised its repo rate 0.5 percent to 9.5 percent.

The Namibian quoted a BoN official as saying, "There have been also signs of the second round effects of food and oil price inflation, evidenced by the upward trend in the inflation of the other categories in the consumer price index basket."

Inflationary worries aside, Namibia's macroeconomic performance has been sound. Citing a report by the African Development Bank (ADB) as its source, the newspaper New Era (Windhoek) said, "Namibia has experienced robust economic growth over the past six years, which averaged 4.5 percent and is expected to accelerate to five percent this year and in 2008."

The International Monetary Fund (IMF) estimates Namibian growth at 4.8 percent in 2007, and 4.6 percent for 2008.


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