Category Archives: Economic Research

Economic Research

Building Plans – March 2018

By | | ,
Comments Off on Building Plans – March 2018

A total of 129 building plans were approved by the City of Windhoek in March. This is a slight decline in the number of plans approved on a monthly basis when compared to the 134 building plans approved in February. In value terms however, approvals increased slightly by N$4.4 million to N$82.4 million in March. 91 Buildings with a value of N$100.5 million were completed during March. The year-to-date value of approved building plans currently stands at N$429.7 million, 9.4% higher than the corresponding period in 2017. On a twelve-month cumulative basis, 1,916 building plans building plans were approved, an increase of 10.1% y/y, worth approximately N$2.23 billion, an increase of 21.4% in value terms over the prior 12-month period.

Additions to properties made up 106 approvals out of the total 129 approved building plans recorded in March. Year-to-date 343 additions to properties have been approved with a value of N$324 million, rising 46.5% y/y in value terms.

New residential units were the second largest contributor to the number of building plans approved with 60 units approved year-to-date, 14 less than the corresponding period in 2017. In monetary terms, N$80.8 million worth of residential plans were approved year-to-date, 37.3% lower than the first quarter of 2017.

The number of new commercial units approved in 2018 amounted to 13, valued at N$24.9 million. This compares to 9 units valued at N$42.7 million approved over the same period in 2017. On average over the last 20 years, 14.8 commercial units valued at N$83.0 million were approved in the first quarter of the year (this value is not inflation adjusted).

From a 12-month cumulative perspective, 1,916 building plans have been approved by March, an increase of 10.8% when compared to the corresponding period in 2017. This increase is positive news as it signals an increase in private sector construction activity. The Bank of Namibia announced last week that the MPC has decided to keep the repo rate unchanged at 6.75%, thus not following the South African Reserve Bank’s decision to cut rates by 25 basis points. The domestic economy continues to languish and monetary easing was expected as a measure to stimulate the economy. A decrease in the level of international reserves determined the MPC decision at the end of the day. This decision means that consumers and businesses are not provided with slight cost of debt relief and that it is not more attractive for businesses to acquire the debt finance needed to expand and invest in capital projects.

NCPI – March 2018

By | | ,
Comments Off on NCPI – March 2018

The Namibian annual inflation rate remained at 3.5% y/y in March, unchanged from February, and significantly down from the 7.0% recorded during the same period last year. Prices increased 0.1% m/m. Of the twelve basket items, four saw a higher annual inflation rate than the previous month, two remained unchanged, while six categories saw lower rates of price increases. Prices for goods increased by 2.8% y/y while prices for services grew by 4.4%, similar annual price increases to those seen in February.

Housing and utilities remained the largest contributor to annual inflation due to its large weighting in the basket. This category remained flat m/m and increased 3.3% y/y, contributing 0.9% towards the annual inflation figure. Year-on-year price increases within the subcategories showed little change from those recorded in February, with the exception being price increases for regular maintenance and repair of dwellings which slowed down to 1.7% y/y in March, from the 3.0% y/y in February. From a month on month perspective, prices in this subcategory increased by 0.3%, while electricity, gas and other fuels increased by 0.1% m/m. The rest of the subcategories remained unchanged month on month.

The transport basket category contributes about 14% towards annual inflation, and serves as the third largest basket item by weighting. It accounted for 0.7% of annual inflation in March which makes it the second largest contributor this month. Prices for transport rose by 0.3% m/m and 5.4% y/y. Prices related to the purchases of vehicles rose by 6.9% y/y in March compared to an 8.2% y/y increase in February. The price of crude oil has surged to levels last seen in 2014 as the risk of violent conflict grips the market and raises concerns over potential Middle East supply disruptions.

The alcoholic beverages and tobacco category showed slightly slower increases of 4.3% y/y and 0.3% m/m. Tobacco prices increased by 1.9% y/y, while alcohol prices increased by 4.8% y/y.

Namibian annual inflation at 3.5% y/y continues trending lower than that of South Africa. South Africa’s February inflation was 4.0% y/y, making it the lowest rate since March 2015 and remaining well within SARB’s target range. The SARB, being an inflation targeting central bank, cut interest rates by 25 basis points at its March MPC meeting whilst pointing out that indications are that a low point in the inflation cycle has been reached. SARB Governor Lesetja Kganyago said that the main changes in the inflation forecast relate to the exchange rate and has cautioned that an international trade war could push inflation expectations higher.

The Bank of Namibia announced this week that the MPC has decided to keep the repo rate unchanged at 6.75% due to foreign reserves having dropped by N$4.1 billion in the past three months. According to BoN, foreign reserves stood at N$26.1 billion at 31 March.

PSCE – February 2018

By | | ,
Comments Off on PSCE – February 2018

Overall

Private sector credit extension (PSCE) increased by N$1.1 billion or 1.2% m/m in February, bringing the cumulative credit outstanding to N$91.6 billion. On an annual basis, private sector credit extension increased by 5.1% in February, a slight uptick when compared to the 5.0% y/y growth recorded in January. On a rolling 12-month basis, N$4.4 billion worth of credit was extended to the private sector, with individuals stacking up N$3.5 billion worth of debt while N$767.6 million was extended to corporates. The claims on non-resident private sector increased by N$139.4 million y/y.

Credit extension to households

Credit extension to households expanded by 0.6% on a monthly basis and 7.0% on an annual basis in February.  The slight monthly increase in household debt was a result of a 0.8% m/m or N$272.8 million increase in mortgage loans extended. This follows the 0.2% increase in mortgage loans in January. Year on year the value of mortgage loans extended increased by 8.2%, well in excess of the overall rate of growth in PSCE. The increase in overdraft facilities slowed down to 0.3% m/m, following the 3.8% m/m increase in January. Installment credit, which is often used to finance new vehicle purchases, remains depressed, contracting by 2.8% y/y and 0.4% m/m. Cumulative new vehicle sales continued its downward trend in February, with the reduction in government spending having a direct effect on the demand for new vehicles.

Credit extension to corporates

Credit extension to corporates grew by 2.0% m/m in February after increasing by 0.3% m/m in January. On an annual basis credit extension to corporates accelerated to 2.1% y/y from 1.7% y/y in January. This was due to growth in the “other claims” category, which increased 6.8% m/m and y/y. Mortgage loans to corporates increased by 0.5% m/m and 6.4% y/y. Overdraft facilities extended to corporates increased by 2.2% on both a monthly and yearly basis. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 0.2% m/m and 6.4% y/y in February. Credit extended to corporates in February explains approximately 92% of the change in credit extended to corporates on a year on year basis.

Banking Sector Liquidity

The overall liquidity position of commercial banks deteriorated to an average of N$1.85 billion during February, a decrease of N$59.3 million compared to the preceding month. The decrease in the overall liquidity position culminated from cross border trade-related outflows and corporate tax payments during the review period according to the Bank of Namibia. Commercial banks continue to utilize BoN’s repo facility, and although average repos have decreased slightly from N$644 million in January to N$603 million in February, the use of the facility suggest that some banks are experiencing mild liquidity stress.

Reserves and money supply

Foreign reserves decreased by N$1.5 billion to N$26.8 billion in February, the lowest level since May last year. According to the Bank of Namibia, the decline in the level of reserves was due to net commercial bank purchases of foreign currency, net government purchases and maturities of foreign currency investments held with the central bank during the period under review.

Outlook

Private sector credit extension continued its slow start in the second month of 2018, with the growth during the month mainly driven by the increased demand for credit by the corporate sector while that of the household sector declined. This month, South Africa survived a credit ratings downgrade from Moody’s, and saw inflation figures remaining well within SARB’s target band. This gave the bank room to cut rates by 25 basis points, with the possibility of further cuts as the year progresses, and BoN is expected to follow suit. This will bring relief to both consumers and the corporate sector, and will make it more attractive for businesses to acquire the debt finance needed to expand and invest in capital projects, and in turn hire more people.