Namibia’s household debt increased by 2.8% to N$61.8 billion in December 2021 from N$60.1 billion in January the same year due to a rise in loans and advances, latest figures from the Bank of Namibia show.
This is a daily increase of about N$4.6 million last year.
The household debt stock, however, increased by 2.1%, compared to the N$60.5 billion recorded in December 2020.
In the period under review, the corporate debt, according to the central bank, decreased by 1.3% from N$44.9 billion to N$44.3 billion.
Credit extended to the private sector moderated to 1.2% y/y in December 2021 from 1.7% y/y in November 2021, BoN said.
“The modest increase in credit growth was driven by an increase in household credit of 2.1% y/y in December 2021 (compared to 2.5% y/y in November 2021), with all subcategories recording positive growth except overdrafts. Corporate sector credit growth moderated to -0.1% y/y in December 2021, compared to 0.6% y/y growth recorded in November 2021.”
“The biggest contributors for households were other loans and advances (including credit card debt amongst other), increasing by 2.8% y/y in December 2021, compared to 2.3% y/y in the prior month, and mortgage loans, increasing by 2.6% y/y in December 2021, compared to 3.4% y/y in the prior month.
“Both installment and overdraft credit decreased for a second consecutive month. Instalment and leasing credit contracted by 31.5% y/y in December 2021 (compared to -0.4% y/y in the prior month). Overdrafts decreased by 3.3% y/y in December 2021 (compared to -3.8% y/y in the prior month),” the Bank added.
Repayments and lower demand in mortgage loans and overdrafts by businesses in the commercial services sector weighed most on corporate credit extension.
“We expect demand for credit to remain subdued not only due to solvency concerns amongst the private sector as a result of a low growth environment, but also due to commercial banks growing more cautious and risk averse in lending out to the public. For example, we are aware that many clients at various dealerships see their car loans rejected by the banks. Another factor would be that banks will start to earn higher interest rates on shorter-term deposits and money market securities, increasing the risk trade-off between lending money to clients versus safely earning higher yields,” said Simonis Storm Economist Theo Klein.
“Growth in credit extension averaged 2.4% in 2021, compared to our forecast of 2.5%. We forecast average credit growth of 1.7% in 2022.”
Klein forecast the Bank of Namibia to hike the repo rate by 125bps in 2022, increasing the repo rate from 3.75% to 5.00% and subsequently taking the prime interest rate from 7.50% to 8.75% by the end of 2022.
According to findings of an Old Mutual survey, Namibians are turning to debt to supplement their income in the face of the raging coronavirus pandemic that has impacted economic activity.
