Category Archives: Economic Research

Economic Research

NCPI – April 2018

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The Namibian annual inflation rate increased marginally to 3.6% y/y in April, following the 3.5% y/y increase in prices recorded in March. Annual inflation has slowed markedly from the 6.7% recorded during April last year. On a month-on-month basis, prices increased 0.3%. Overall, prices in six of the basket categories rose at a faster annual rate than during the preceding month, four at a slower rate and two grew at a steady pace. Prices for goods rose by 3.1% y/y while prices for services grew by 4.3%.

The largest contributor to annual inflation remains Housing and utilities due to its large weighting in the basket. This category remained flat m/m for a second month and increased 3.4% y/y, contributing 1.0 percentage point towards the annual inflation figure. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.2% y/y, which is a faster rate of increase than the 1.7% y/y registered the previous month. On a month-on-month basis prices in this subcategory increased by 1.3%. The rest of the subcategories remained unchanged month-on-month and showed little change in price increases year-on-year.

Transport, with a weighting of about 14%, serves as the third largest basket category, accounting for 0.8 percentage points of annual inflation in April and making it the second largest contributor this month. Transport costs increased by 0.6% m/m and 5.8% y/y. Prices related to the purchases of vehicles rose by 7.3% y/y in April compared to a 6.9% y/y increase recorded in March. US president Donald Trump’s withdrawal from the Iran nuclear deal has raised concerns last week that the global supply of oil will be squeezed, pushing up the price of Brent Crude by almost 3%.

The alcoholic beverages and tobacco category showed slightly faster inflation of 4.7% y/y and 0.8% m/m. Tobacco prices increased by 0.5% y/y, while alcohol prices increased by 5.7% y/y.

Namibian annual inflation at 3.6% y/y is once again lower than that of South Africa, with South African annual inflation slowing to 3.8% y/y in March, its lowest rate in seven years. SARB Governor Lesetja Kganyago has recently said that this benign inflation environment is not expected to continue as the expectation is that the most recent reading was the low point in the current inflation cycle due to a combination of base effects and tax increases (including VAT and fuel levy increases). The currently favourable inflationary environment has contributed to a sounder macroeconomic environment, and has afforded some room for monetary policy to remain accommodative for now and help foster improved economic growth.

New Vehicle Sales – April 2018

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825 New vehicles were sold in April, which represents a 27.8% m/m decrease from the 1,142 vehicles sold in March, and is down 14.0% from April 2017 when 959 vehicles were sold. Year-to-date 3,886 vehicles have been sold of which 1,829 were passenger vehicles, 1,888 light commercial vehicles, and 169 medium and heavy commercial vehicles. On a twelve-month cumulative basis, vehicle sales continue to wither with a total of 12,675 new vehicles sold as at April 2018, down 16.6% from the 15,202 sold over the comparable period a year ago, and the lowest since January 2012.

A total of 373 new passenger vehicles were sold during April, decreasing by a substantial 27.9% m/m and 8.8% y/y. Year-to-date passenger vehicle sales rose to 1,829, reflecting lower sales than the preceding five years and a 9.4% decline from April 2017. On a rolling 12-month basis, passenger vehicle sales are at their lowest level since December 2011.

Commercial vehicle sales have declined to 452 units, representing a 27.7% m/m and 17.8% y/y contraction. During April, 397 light commercial vehicles, 25 medium commercial vehicles, and 30 heavy commercial vehicles were sold. On an annual basis, light commercial vehicle sales have declined by 21.4%, medium commercial sales, however, increased by a staggering 78.6%, while heavy and extra heavy sales have contracted by 3.2%. On a twelve-month cumulative basis, light commercial vehicle sales remain depressed, decreasing by 18.9% y/y, while medium commercial vehicle sales increased by 5.9% y/y and heavy commercial vehicle sales increased by 1.1% y/y.

Year-to-date, Toyota and Volkswagen continue to maintain their strong hold on the passenger vehicle market based on the number of new vehicles sold, claiming 37.1% and 28.0% of the market respectively. They were followed by Hyundai and Mercedes at 5.2% and 4.7% respectively, while the rest of the passenger vehicle market continues to be shared by several competitors.

Toyota also remains the leader in the light commercial vehicle space with a 58.1% market share, with Nissan in second place with a 15.3% share. Ford and Isuzu claimed 8.1% and 6.6% of the number of light commercial vehicles for the year, respectively. Hino leads the medium commercial vehicle category with 40.3% of sales while Scania remains number one in the heavy and extra-heavy commercial vehicle segment with 22.7% of the market share year to date.

The Bottom Line

Cumulative vehicle sales continue to contract on a rolling 12-month basis, and year-to-date figures are hovering around 2011 levels.

PSCE – March 2018

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Overall

Private sector credit extension (PSCE) increased by N$724.8 million or 0.8% m/m in March, bringing the cumulative credit outstanding to N$92.4 billion. On a year-on-year basis, private sector credit extension increased by 5.9% in March, increasing at a slightly quicker rate than the 5.1% recorded in February. From a rolling 12-month basis, N$5.1 billion worth of credit was extended to the private sector, compare to the previous year, the rolling 12-month issuance is down 25.4% from the N$6.8 billion observed at the end of March 2017. Of this cumulative issuance, individuals took up credit worth N$3.5 billion while N$757.9 million was issued to corporates. Claims on non-resident private sectors increased by an immense N$827.3 million, or 190.3%, y/y.

Credit extension to households

Credit extended to individuals increased by 7.0% y/y in March, on par with the year-on-year growth recorded in February. On a monthly basis, household credit extension rose by 0.2% in March which is lower than the increase of 0.6% registered in February. Installment credit extended to households contracted by 2.7% y/y. This contraction is in tandem with diminishing new vehicle sales reported for March since installment credit is largely used to finance vehicle purchases. The value of mortgage loans extended to individuals increased by 0.5% m/m and 8.1% y/y. Demand for overdraft facilities has been slowing since January on an annual basis, increasing by 2.4% y/y in March compared to 3.4% y/y in February. Overdraft facilities recorded a contraction in credit outstanding of 1.7% m/m in in March.

Credit extension to corporates

Credit extension to corporates contracted by 0.3% m/m in March after increasing by 2.0% m/m in February. On an annual basis credit extension to corporates increased 2.1% y/y in March, similar to the rate recorded in February. Mortgage loans to corporates remained flat month-on-month, but increased 5.5% y/y. Overdraft facilities extended to corporates increased by 2.5% m/m and 5.8% y/y. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 0.9% m/m and 6.7% y/y in March.

Banking Sector Liquidity

The overall liquidity position of commercial banks increased to an average of N$3.1 billion during March, an increase of N$1.2 billion compared to the preceding month. Government payments and mineral sales proceeds of about N$1.0 billion contributed to the improved liquidity position during March 2018, according to the Bank of Namibia. Commercial banks continue to utilize BoN’s repo facility, and although average repos have decreased considerably from N$603.4 million during February to N$344.5 million during March, the use of the facility suggests that some banks are facing challenges in terms of liquidity.

Reserves and money supply

The stock of foreign reserves decreased by N$94.0 million to N$26.8 billion in March, the lowest level since May last year.

Outlook

Growth in private sector credit extension remained static at the end of March. The Bank of Namibia announced in March that it would not follow the SARB’s action to cut rates by 25 basis points, as the international reserve position has deteriorated over the last few months. We feel that should the reserve position stabilise, the Bank of Namibia would ideally like to cut rates to provide some stimulus to the economy.