Namibian households are topping the list of credit uptake from commercial banks growing by 5% year on year in February, an increase from 4.9% in January, official figures reveal.
The surge is driven by loans and advances which went up by 17.8% year on year, as well as overdrafts and mortgages which both increased by 2.8% year on year.
Other loans and advances include credit card and personal loan debt instruments, additional factors, according to Simonis Storm Security’s Theo Klein.
According to the February Private Credit Extension Report, there is a notable slow trend among corporates in recent months, having been paying off their existing debt rather than taking on new loans.
“This is evidenced by the fact that corporate credit growth averaged a meagre 1.9% in the last five months after peaking at 8.2% in August 2022. Conversely, household credit uptake grew by 5.0% y/y in February 2023 and is currently the main driver of overall credit growth from commercial banks. At the same time, household credit uptake has persistently increased at a higher rate each month after reaching a trough in August 2022,” Klein said.
In addition, Klein said, corporates, especially those in the manufacturing, wholesale, and retail sectors, were mainly net repayers on their debt, leading only to a marginal increase of 0.4% y/y in February 2023, compared to -0.6% y/y in January 2023.
“Corporates were mainly net re-payers on mortgages going down by 5.1% y/y and overdrafts reducing by 3.0% y/y,” stated Klein.
In terms of the private sector, he said, there has been a relatively slow growth below the six-month moving average, even though there is a slight increase of 3.1% y/y in February 2023, compared to 2.6% y/y in the prior month. Klein further notes there is a slow upward trend overall when it comes to credit uptakes, despite higher repo rates and rising inflation.
“In February, total debt in the private sector amounted to N$118.9 billion (Namibian households and corporates, together with non-residents), reflecting an annual increase of 5.1%. Based on the preliminary National Accounts, total private sector debt constitutes about 58% of 2022’s preliminary GDP, with household debt comprising 32% of GDP and corporate debt 22% of GDP,” the economist said.
Irrespective of the standings, Klein is anticipating that the Bank of Namibia will implement another repo rate hike of at least 25bps in April 2023. This forecast, he says, is consistent with the Bank of Namibia’s stance that repo rate hikes will continue until inflation rate lowers to 6% y/y.
“Inflation was recorded at 6.9% y/y in December, 7.0% y/y in January 2023 and 7.2% y/y in February 2023. Persistently high rates of inflation can be attributed to the low base effect during the first half of 2022. However, we anticipate inflation to stabilise in the second half of 2023 as 2H2022 provides a higher base to lift from,” added Klein.
“Meanwhile, the money supply (M2) growth was driven by net foreign assets of depository corporations coupled with improved growth in domestic claims. With this said, together with the growth of 2.1% m/m of money supply M2, we expect credit to grow at a slow pace in 1H2023.”
In February, total debt in the private sector amounted to N$118.9 billion (Namibian households and corporates, together with non-residents).
