The Bank of Namibia (BoN) says its international reserves declined 4.4% month-on-month in October 2023, to N$51.4 billion reflecting increased commercial bank outflows driven by higher import bills.
The end of October saw an improvement in the liquidity position of the banking industry, with cash balances rising to N$7.5 billion from N$7.4 billion attributed to government bond payments during the month.
Additionally, the central bank says October witnessed an inflation rate of 6.0% year-on-year, surpassing expectations primarily linked to escalating fuel prices, with the transport category emerging as the predominant contributor.
“Although the food and non-alcoholic beverages category has been a major driver of headline inflation, in October 2023, the transport category emerged as the predominant contributor,†the Bank of Namibia said.
Meanwhile, Namibia’s private sector credit extension saw a modest uptick, reaching a total credit of N$119.3 billion in October 2023.
While the extension marks a 1.8% year-on-year increase which is a slight improvement from September 2023 it still reveals a decline compared to the 3.5% growth recorded in October 2022.
“The second-lowest growth in 2023, falling below the 2% mark, paints a picture of a subdued credit market amidst broader economic challenges,†said a report released by Simonis Storm
According to the report, a big part of this credit extension is attributed to the resilience of the household sector, which notably experienced an increase in overdraft facilities extended to individuals. Despite a slight decrease in overall household credit growth from September 2023, the sector exhibited a moderate increase of 4.2% year-on-year in October 2023.
“Of particular note is the substantial surge in household overdraft credit, witnessing a remarkable 25.1% year-on-year growth in October 2023. This positive trajectory stands out against the backdrop of elevated inflation and interest rates,†the report reads
On the other hand, the corporate sector is facing challenges with credit extension continuing its downward trajectory for the seventh consecutive month. Contracting by 1.4% year-on-year in October 2023, though a slight improvement from September.
The report further states that from an economic growth standpoint, the persistent negative trend is concerning because the extension of credit to the corporate sector is usually critical for driving overall economic growth.
Also, installment sales and leasing credit continue to exhibit a continuous upward trajectory, with an annual growth rate of 9.4% year-on-year in October 2023. However, there was a deceleration on a month-on-month basis, falling from the 11.6% growth observed in September 2023.
“This slowdown is largely attributed to a reduction in leasing facilities provided to corporations within the retail industry,†it reads
Simonis Storm predicts that the repo rate will be maintained at 7.75%, and the prime rate will also stay unchanged at 11.5%. This aligns with the South African Reserve Bank’s recent decision to keep the repo rate at 8.25% during its meeting on 23 November 2023.
