PSCE records 8% annual growth
THE total credit expended to the private sector rose by N$751 million or 0.8% month on month in November, compared to the N$585 million or 0.6% m/m increase recorded in October.
This is according to the latest Private Sector Credit Extension (PSCE) statistics released by IJG research for November 2018.
The report further elaborates that year-on-year, PSCE grew by almost 8.0% in November compared to 7.8% y/y in October.
November has also been the fourth consecutive month in which PSCE’s growth has kept rising on a year-on-year basis. Cumulative private sector credit outstanding as at the end of November amounted to N$96.645 billion.
IJG further explained that on an annual basis, households were taking up much of the credit extended to the private sector in 2018, accounting for almost two-thirds of the uptake.
The private equity firm, however, states that the wide disproportion between credit extended to households and corporations began to narrow in August.
On a rolling 12-month basis, N$7.126 billion worth of credit was extended to the private sector, with N$3.26 billion being taken up by households. Corporations very nearly equaled that which was extended to households by taking up N$3.21 billion worth of the credit over the last 12-months, while claims on non-residents totaled N$663.2 million.
Credit extended to individuals increased by 6.1% y/y in November, moderating from the 7.0% y/y increase recorded in October.
The year-on-year slowdown in household credit extension was due to moderating growth in mortgages, overdrafts, installment credit and other claims.
Credit extension to corporates increased by 8.9% y/y compared to October’s 7.1% y/y increase.
Shorter-term credit facilities continue to be driving the increase in corporate credit extension.
Overall PSCE growth in November maintained its upward momentum on a year-on-year basis for a fourth consecutive month, increasing by 7.96% y/y. The highest rate of growth in the last 18 months.
IJG stressed that the year 2018, with the omission of pending December PSCE data, has seen very little deleveraging from both consumers and businesses.
“In the midst of recessionary economic growth short-term and unsecured loans have grown at a quicker rate than that of mortgage and installment credit. From a 12-month rolling perspective household demand for credit underpinned growth in PSCE and only until recently have businesses started borrowing more. The increase in corporate credit, however, has been more profound in short-term borrowings,” IJG said.
The Bank of Namibia (BoN) has been accommodative in terms of monetary policy by keeping the repo rate steady at 6.75% since cutting by 25bps in August 2017. How long BoN manages to keep interest rates steady will depend largely on developments in South Africa.
The SARB will closely monitor inflation, which ticked up to 5.2% y/y and is expected to moderate on the back of falling oil prices and moderating transport inflation. Furthermore, the SA economy broke out of a recession and the outlook for possible rate hikes is now pushed towards the latter part of 2019.
BoN expects the Namibia economy to contract by 0.2% in 2018 followed by growth of 1.5% in 2019, a downward revision from its 1.9% estimation in July 2018 and more than half of the 3.1% it estimated in December 2017.