Debt in the private sector, inclusive of Namibian households and corporates, together with non-residents has seen an annual increase of 5.1%.
This is after it stood at N$118.9 billion for February, a N$693 million increase from January this year, exceeding expectations.
According to the analysts at Simonis Storm Securities, the biggest drivers of household credit growth were other loans and advances, which saw a year-on-year (y/y) increase of 17.8%, and overdrafts as well as mortgages which both increased by 2.8% y/y.
Other loans and advances typically include credit card and personal loan debt instruments.
“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,” Simonis Storm said.
According to the firm, household credit uptake grew by 5.0% y/y in February 2023 and is currently the main driver of credit growth from commercial banks.
The increase comes as banks in Namibia made a combined N$3 billion in 2022 a 33,5% increase. According to the Bank of Namibia, the increase in the repo rate in 2022 was one of the main contributors to this.
Simonis Stormalso said household credit uptake has persistently increased at a higher rate each month after reaching a trough in August 2022. A trough in economics is a low turning point or a local minimum of a business cycle.
Despite higher repo rates and rising inflation, the analysts, however, say credit uptake is on a slow upward trend.
“Based on the recent short-run trend in inflation, we anticipate that BoN will implement another repo rate hike of at least 25bps at their next meeting in April 2023. This forecast is consistent with the BoN’s stance that repo rate hikes will continue until the inflation rate lowers to 6% y/y,” the firm said.
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.”