Category Archives: Economic Research

Economic Research

NCPI – May 2018

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The Namibian annual inflation rate ticked up to 3.8% in May, following the 3.6% y/y increase in prices recorded in April. On a month-on-month basis, prices increased 0.4%. On a year-on-year basis, overall prices in six of the basket categories rose at a quicker rate in May than in April, with four categories recording slower rates of inflation and two categories remained unchanged. Prices for goods increased by 3.6% y/y while prices for services increased by 4.2% y/y.

Due to its large weighting in the basket, housing and utilities remains the largest contributor to annual inflation. Annual inflation for this category increased by 3.3% y/y and 0.3% m/m. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 2.6% y/y, which is a slower rate of increase than the 3.2% y/y registered the previous month. On a monthly basis, prices in this subcategory increased slightly by 0.7%. Prices in the electricity, gas and other fuels subcategory increased by 1.7% m/m and 5.5% y/y. The rest of the subcategories remained unchanged month-on-month and showed slightly slower price increases year-on-year.

Transport was the second largest contributor to annual inflation, accounting for 0.7% of the total 3.8% annual inflation figure. Prices for transport rose by 5.6% y/y in May, marginally slower than the increase of 5.8% y/y recorded in April. Prices related to the purchases of vehicles increased by 6.6% y/y in May compared to the 7.3% y/y increase recorded in the preceding month. The price of oil has retreated form the highs of May as Saudi Arabia and Russia signalled they may increase output later this year to offset potential supply losses from Iran and Venezuela.

Alcoholic beverages and tobacco, the third largest category, saw slightly faster inflation of 5.4% y/y and 0.7% m/m. Tobacco prices increased by 2.1% y/y, while alcohol prices increased by 6.2% y/y.

Namibian annual inflation at 3.8% y/y continues trending lower than that of South Africa. South Africa’s consumer inflation rate jumped to 4.5% in April after reaching a seven-year low of 3.8% in March. The SARB stated that risks and uncertainties that could possibly affect the inflation rate have shifted to the upside. Furthermore, the weakening rand may push inflation higher, decreasing the likelihood that either the SARB or BoN will cut interest rates again in 2018. BoN yesterday announced that the MPC decided to keep the repo rate unchanged and stated that inflation is expected to average around 4% in 2018.

New Vehicle Sales – May 2018

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A total of 918 new vehicles were sold in May, representing an 11.3% m/m increase from the 825 vehicles sold in April, but 20.5% lower than in May 2017 when 1,155 new vehicles were sold. Year-to-date 4,804 vehicles have been sold of which 2,203 were passenger vehicles, 2,395 light commercial vehicles, and 206 medium and heavy commercial vehicles. From a rolling 12-month basis, a total of 12,438 new vehicles were sold at May 2018, representing a contraction of 16.1% from the 14,822 sold over the comparable period a year ago.

A total of 374 new passenger vehicles were sold during May, just 1 more than in April. From a year-on-year perspective however, May 2018 new passenger vehicle sales were 116 units lower than the 490 sold a year ago. The rolling 12-month vehicle sales continue to reflect weakness in the number of passenger vehicles sold, declining 15.2% as at May. Year-to-date passenger vehicle sales rose to 2,203, reflecting a 12.2% decline from May 2017.

544 Commercial vehicles were sold in May, representing a 20.4% m/m increase, but a contraction of 18.2% y/y. During the month, 507 light commercial vehicles, 18 medium commercial vehicles and 19 heavy commercial vehicles were sold. On a year-on-year basis, light commercial sales have declined by 15.5%, medium commercial sales contracted 28% and heavy and extra heavy sales have declined by 51.3%. On a twelve-month cumulative basis, commercial vehicle sales remain depressed with light commercial vehicle sales decreasing by 17.9% y/y, medium commercial vehicle sales declining 0.4% and heavy commercial vehicle sales dropping by 4.9% y/y.

Year-to-date, Toyota and Volkswagen continue to hold a strong market share in the passenger vehicle market based on the number of new vehicles sold, claiming 36.4% and 28.5% of the market respectively. They were followed by Hyundai and Kia at 5.4% 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 58.0% market share, with Nissan in second place with a 16.3% share. Ford and Isuzu claimed 7.6% and 6.0% of the number of light commercial vehicles for the year, respectively. Hino leads the medium commercial vehicle category with 43.3% of sales while Scania remains number one in the heavy and extra-heavy commercial vehicle segment with 23.3% of the market share year to date.

The Bottom Line

The outlook for new vehicle sales remains bleak with the cumulative number of new vehicle sales as at the end of May amounting to 12,438, representing a decline of over 45% from the peak of 22,664 new vehicle sales recorded in April 2015. Year-on-year, the cumulative number of new vehicles sold have contracted by 16.1% from the 14,822 cumulative sales recorded in May 2017. Preliminary national accounts released by the Namibian Statistics Agency (NSA) estimates that the Namibian economy contracted by 0.8% in 2017. New vehicle sales statistics are a lagging indicator, acting as a proxy of the depressed economic conditions present at moment. Reduced government spending, on capital assets in particular, continues to have an effect on the number of new vehicles sold. Tighter credit controls have further curbed consumer’s access to credit financing normally used for new vehicle purchases. The year-on-year decline in new vehicle sales further suggests that vehicle owners are holding on to the vehicles they already own. The Bank of Namibia today announced that the MPC decided to keep the repo rate unchanged, which means consumers and businesses alike will not be provided any reprieve in lowering their current debt servicing cost.

PSCE – April 2018

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Overall

Private sector credit extension (PSCE) increased by N$271.1 million or 0.3% m/m in April, bringing cumulative credit outstanding to N$92.6 billion. On a year-on-year basis, private sector credit extension increased by 6.0% in April, on par with the 5.9% increase recorded in March. On a rolling 12-month basis N$5.3 billion worth of credit was extended to the private sector, with individuals taking up N$3.5 billion while N$920 million was extended to corporates. Claims on non-resident private sector credit increased by 0.8% m/m and 196.0% y/y.

Credit extension to households

Credit extended to individuals increased by 6.9% y/y in April and remained flat from the 7.0% y/y growth recorded in March. On a month-on-month basis household credit extension rose by 0.5% in April which is marginally faster than the 0.2% registered in March. Installment credit remained depressed, contracting by 3.3% y/y and 0.8% m/m. The value of mortgage loans extended to individuals increased by 0.6% m/m and 8.0% y/y. Demand for overdraft facilities continued to slow down on an annual basis, increasing by 1.1% y/y in April compared to 2.4% y/y in March. Overdraft facilities recorded a contraction in credit outstanding of 0.3% m/m in April.

Credit extension to corporates

Credit extension to corporates remained flat month-on-month in April after contracting by 0.3 m/m in March. Year-on-year credit extension to corporates increased by 2.6% in April, slightly faster than the 2.1% y/y recorded in the two previous months. Mortgage loans to corporates increased by 1.9% m/m and 7.9% y/y. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 7.9% y/y in April. Overdraft facilities extended to corporates contracted by 2.0% m/m, but increased by 2.4% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks increased by N$190 million to an average of N$3.2 billion during April. According to Bank of Namibia, government payments and mineral sales proceeds of about N$1.0 billion contributed to the improved liquidity position during the month. Commercial banks continue making use of BoN’s repo facility, and although average repos have moderated from N$344.5 million during March to N$197.1 million in April.

Reserves and money supply

The stock of foreign reserves increased by N$3.9 billion to N$30.7 billion in April. This increase mainly stemmed from inflows of SACU receipts, commercial bank sales of foreign currency, increased rand seignorage receipts as well as the depreciation of the Namibian dollar against all the major foreign currencies during the period under review, according to the Bank of Namibia.

Outlook

Private sector credit extension growth remained depressed at the end of April. Although the country’s foreign reserve position strengthened during the month, our expectation is that Bank of Namibia will leave rates unchanged at its MPC meeting next week, thereby not providing consumers and businesses with any further relief, although current rates remain relatively accommodative by historic standards.

The SARB’s MPC meeting last month unanimously decided to keep interest rates unchanged, stating that risks and uncertainties that could possibly affect the inflation rate have shifted to the upside. The rand was initially supported by the election of President Cyril Ramaphosa in February, but has since weakened in line with its emerging-market peers as rising treasury yields boosted the demand for US dollar assets. The weaker currency may push inflation higher, decreasing the likelihood that SARB will cut interest rates again in 2018.