Namibia’s broad money supply growth slows down … as credit extended to individuals increase
The local economy’s annual growth in broad money supply has slowed down to 4.4% year on year as at the end of April 2018 due to a decline in claims of non-residents in the form of foreign investment withdrawals.
In layman’s terms this is, according to Investopedia, the totality of assets that households and businesses can use to make payments or to hold as short-term investments such as currency, funds in bank accounts and anything of value resembling money.
On the other hand, credit extended to individuals moderated to 7.0% from 7.2% recorded in the prior month, this decrease was mainly due to the decrease in instalment credit which fell by 1.32% m-o-m and 5.16% y-o-y.
Private Sector Credit Extension increased (PSCE) to 5.8 percent at the end of April 2018, a 0.1 percentage point increase compared to the preceding month, driven by an increase in demand for mortgage credit by the corporate sector which increased to 7.9 percent at the end of April 2018 from 5.9 percent in the prior month.
The Bank of Namibia highlighted the increase was mainly driven by a rising demand for commercial property loans by the business sector.
“This is a positive sign for the economy as mortgage loans are long term commitments. Furthermore, instalment credit and overdrafts reported negative growths of 1.32% m-o-m and 1.59% m-o-m respectively as at the end of April 2018, which resulted in a slow growth of PSCE.”
“The contraction in credit instalments was reflected in lower demand for vehicles in April, which declined by 27.8% m-o-m compared to an increase of 9.9% reported in the prior month (Figure 1). We expect PSCE to continue growing at a slow pace as the economy continues to struggle,” said Simonis Storm Securities.
The growth in credit extended is also is in line with PSG’s forecast that GDP growth has improved in H1 2018 and that the demand for credit should advance moderately this year.
“That said, credit extension growth remains under pressure due to relatively weak domestic demand, job losses, a higher tax burden and stricter lending criteria. We continue to expect a modest economic recovery this year on the back of robust mining output, modest recoveries in the construction and wholesale & retail sales industries as well as improved government liquidity thanks to an African Development Bank (AfDB) loan,” says Eloise du Plessis.
She warns that the suspension of mining operations at Langer Heinrich (Uranium) and Tschudi (Copper), erratic rainfall, protectionism and higher than expected oil prices have dampened growth expectations.