Private sector credit extension/Inflation slows down … as international reserve stock tick up
The Bank of Namibia has announced that growth in private sector credit extension (PSCE) continued to slowdown at the end of October 2017 while reserves increased to N$31.6 billion from N$31.4 billion.
The slower demand for credit from both the household and corporate sectors continued to drive the sluggish growth in PSCE.
Annual growth in PSCE slowed from 5.4 percent at the end of September 2017 to 5.2 percent at the end of October 2017.
In nominal terms, PSCE stood at N$88.5 billion.
The subdued growth in PSCE was mainly driven by the weak growth in short term credit categories such as other loans and advances and overdraft credit.
Growth in total credit extended to businesses continued its downward trend, as businesses continued to reduce their demand for short term debt during October 2017.
Annual growth in credit extended to businesses moderated from 2.4 percent at the end of September 2017 to 2.2 percent at the end of October 2017.
The weak growth was reflected in most credit categories, driven by a decrease in the demand for short term debt facilities.
On a monthly basis, overdrafts extended to businesses fell by 4.9 percentage points to reach 5.0 percent, while other loans and advances contracted from a growth of 3.0 percent to 1.6 percent at the end of the month under review.
Growth in total credit extended to individuals moderated at the end of October 2017.
The annual growth in credit extended to individuals moderated to 7.4 percent, decreasing by 0.1 percentage point when compared to the previous month.
The sluggish growth is evident in all credit categories, most notably in instalment sales and other loans and advances.
This corresponds to the decrease in vehicle sales at the end of October 2017 compared to the previous month.
The annual growth in total overdraft credit continued trending downward at the end of October 2017.
Total overdraft credit represents 12.6 percent of total PSCE.
Annual growth in total overdraft credit slowed by 3.7 percentage points to reach 6.6 percent, month-on-month.
The slow down in overdraft credit was attributed to a decline in demand from both businesses and individuals, specifically driven by the former.
On a nominal basis, overdraft credit extended to businesses stood at N$8.1 billion at the end of October 2017, lower than the N$8.7 billion in the previous month.
The annual growth in other loans and advances (i.e.personal/commercial loans and credit cards) slowed significantly at the end of October 2017, driven by the business sector.
Annual growth in other loans and advances stood at 7.0 percent at the end of October 2017, from 9.9 percent at the end of September 2017. Although the slow down is evident in both individuals and businesses, it was mainly driven by other loans and advances extended to businesses, which contracted by 4.6 percentage points, to reach 1.6 percent at the end of October 2017.
This further implies the decrease in the demand for short term debt in the business sector.
Instalment sales contracted further at the end of October 2017.
Generally, instalment sales credit has been on a downward trajectory since the introduction of the credit amendment act in August 2016.
On a monthly basis, annual growth in instalment sales contracted further to 4.0 percent during October 2017, compared to a contraction of 3.5 percent in September 2017.
The contraction was mainly evident in instalment sales to individuals, which contracted from 0.6 percent in September 2017 to 2.0 percent at the end of October 2017.
The continued contracted growth is in line with the decrease in vehicles sales at the end of October 2017 when compared to the previous month.
The annual growth in mortgage credit extended to the private sector tilted up at the end of October 2017.
Mortgage credit, rose to 8.2 percent at the end of October 2017, compared to 7.5 percent at the end of the preceding month.
The rise in annual growth is evident in both the individual and business sectors, specifically driven by the business sector, in line with the increase of commercial property construction in the costal area.
Notably, mortgage credit has observed a moderate downward trend since the Loan-to-Value (LTV) ratio was introduced to the market in the
middle of 2016.
The overall liquidity position of commercial banks declined somewhat during October 2017.
The overall liquidity position declined to N$2.9 billion at the end of October 2017, from N$3.5 billion at the end of September 2017.
The decrease in the overall liquidity position was as a result of cross border payments done during the month under review.
The October 2017 average liquidity position was about N$1.7 billion higher than the N$1.1 billion average balance recorded in October 2016.
The overall inflation slowed during October 2017.
Namibia’s annual inflation rate stood at 5.2 percent in October 2017, a 0.4 percentage point decrease compared to the preceding month.
The main drivers of the slowdown were clothing and footwear, augmented by furnishings household equipment and routine housing maintenance as well as communications.
Similarly, food and non- alcoholic beverages slowed by 0.5 percentage point.
On the other hand, inflation in the transport category rose by 0.5 percent point, compared to the previous month.
The increase in the transport category was driven by an increase in the price of vehicles.