The Bank of Namibia has reduced the repo rate by 25 basis points from 7.5% to 7.25%.
Commercial banks are expected to reduce their prime lending rates by the same margin, from 11.25% to 11%.
The central bank's decision was aimed at ensuring continued support for the domestic economy while simultaneously safeguarding the peg between the Namibia dollar and the South African Rand.
The decision to reduce the repo rate was made following comprehensive reviews of domestic, regional, and global economic development.
"Inflation receded notably, and the projected medium-term inflation path has been revised downwards. Growth in Private Sector Credit Extension (PSCE) remained subdued. The merchandise trade deficit widened further, while the stock of international reserves continued to be sufficient to preserve the currency peg and meet the country's international financial obligations," said Governor Johannes !Gawaxab.
!Gawaxab says despite the slow growth in the second quarter, the Namibian economy did, however, record a slower growth rate of 3/5% during the second quarter of 2024.
"Looking ahead, growth is projected to moderate to 3.1% in 2024 and 3.9% in 2025, compared to a firmer pace of 4.2% recorded in 2023. The anticipated slowdown is primarily attributed to weakening primary industry, partly reflecting the prevailing drought conditions and sluggish global demand."
Since the previous MPC meeting, inflation has fallen to the downside, falling from 4.6% in July 2024 to 3.4% in September 2024, the lowest since August 2021.
"Going forward, the medium-term inflation forecast has been revised downward to 4.3% in 2024 and 4.0% in 2025, compared to 4.7% and 4.4%, respectively, at the previous MPC meeting. The revised forecast is due to a more favourable outlook for international crude oil prices and a stronger exchange rate."
Namibia's merchandise trade deficit widened to N$25.8 billion during the first eight months of 2024, relative to N$21.2 billion in the same period of 2023.
The stock of international reserves stood at N$57.1 billion as of the 30th of September 2024, compared to N$60.8 billion at the end of July 2024.