Namibia’s private sector credit (PSCE) growth is expected to remain subdued in the short term following the Bank of Namibia’s (BoN) decision on Wednesday to hike interest rates by 50 basis points, bringing the prime lending rate to 10.5% and just 25bps below the highest lending rate of the past decade, analysts have said.
“The rapidly rising borrowing costs, coupled with the muted economic activity means that PSCE growth will possibly remain subdued in the short term. On the supply side, we see little change from the current status quo over the near term,” research firm IJG noted.
This comes as PSCE for the month of October, according to the Central Bank, rose by N$104.5 million (0.1% m/m), bringing the cumulative credit outstanding to N$109.6 billion after normalising for interbank swaps accounted for in non-resident private sector claims.
“Year-on-year, private sector credit grew by 3.0% in October, marginally slower than the 3.6% y/y growth recorded in September. On a 12-month cumulative basis, N$3.21 billion worth of credit was extended to the private sector. Of the cumulative issuance, corporates borrowed N$1.37 billion and individuals took up N$2.29 billion,” IJG said.
Credit extended to individuals, according to IJG, increased by 0.8% m/m and 3.7% y/y in October.
“Annual growth in all of the credit lines to individuals picked up in October. Mortgage loans to individuals posted growth of 0.4% m/m and 2.6% y/y. Other loans and advances (consisting of credit card, personal, and term loans) grew by 3.0% m/m and 10.3% y/y, and instalment credit rose by 0.9% m/m and 2.6% y/y. Overdraft facilities to individuals contracted by 1.3% m/m and 0.3% y/y.”
Credit extended to corporates, however, contracted during the period under review by 0.9% m/m, but rose by 3.1% y/y in October attributed to a decline in credit demand and deleveraging by corporates in the construction and services sectors.
“All of the credit lines to corporates, bar other loans and advances, saw a deceleration in annual growth in October. Mortgage loans grew by 0.1% m/m but declined 3.3% y/y. Instalment credit posted growth of 1.7% m/m and 14.6% y/y. Overdrafts declined by 2.3% m/m and 6.2% y/y. Other loans and advances to corporates contracted by 1.5% m/m but rose 13.2% y/y.”
Banking sector overall liquidity improved in October, rising by N$616.7 million to an average of N$3.33 billion before ending the month at N$3.4 billion.
“The BoN attributed the improved liquidity position to inflows from government bonds, specifically the redemption of GI22 and interest payments on other bonds.”
