Cheap oil mostly good news for Nam

The dramatic drop in the oil price seen in the last week will have some impact on the Namibian economy, broadly positive, Cirrus Securities says.

“The material drop in the oil price in rand will contribute towards an extremely low inflation year for Namibia.

“With rent price inflation (23% of the inflation basket) for the year set at -2.3%, and with material reductions in transport costs expected through the rest of the year (11% of the basket), over a third of the basket may well be negative for the year ahead,” Cirrus says in their updated economic outlook, released on Sunday.

Without major food inflation expected, Cirrus now expects inflation to average little over 2.5% for 2020.

“Because Namibia is a net importer of oil products, the fall in the oil price is beneficial to the country on a net basis, and beneficial to the balance of payments in particular.

“However, on the downside, the lower oil price does make an imminent resurgence of the Angolan activity that the country lost in 2014/15, unlikely,” Cirrus says.

Some of the extensive oil and gas exploration currently planned for the country may be slowed, postponed or cancelled, should the price remain low for an extended period of time, Cirrus warns.