Category Archives: Economic Research

Economic Research

PSCE – July 2017

By | | ,
Comments Off on PSCE – July 2017

Overall

Total credit extended to the private sector increased by N$387.7 million or 0.44% m/m in July, bringing the cumulative credit outstanding to N$87.9 billion. On a year on year basis, credit extended grew by 6.82% in July, compared to a revised 7.21% recorded in June. Growth in total private sector credit extension continues to fall in 2017, on a rolling 12-month basis N$5.6 billion worth of credit was extended. N$1.71 billion in credit has been extended to corporates and N$3.97 billion to individuals on a 12-month cumulative basis, while the non-resident private sector has decreased their borrowings by N$31.15 million.

Credit extension to households

Growth in credit extension to individuals ticked up slightly to 8.35% y/y and 0.5% m/m, compared to 8.27% y/y growth recorded in June. Installment credit rose by 0.24% m/m while year on year growth marginally rose 0.4%. The decline in new vehicle sales of 12.8% year on year is reflected in the subdued growth in installment credit, with new vehicle sales making up a large portion thereof. Furthermore, the contraction in new vehicle sales are attributable to a slowing economy and the amendments to the Credit Agreement Act. These amendments now obligate shorter repayment periods, the abolishment of balloon payment options and zero deposit financing. Growth in mortgage loans showed relative improvement in July, recording growth of 0.6% m/m and 8.7% y/y. Overdraft facilities extended to individuals slowed by 0.2% m/m but rose by 18% y/y, the highest it has been since December 2014. Other loans and advances recorded growth of 1.2% m/m and 16.5% y/y.

Credit extension to corporates

Credit extension to corporates rose 0.4% m/m in July from contracting 1.6% in June. Year on year credit extension rose 5.0%, falling from year on year growth of 5.6% in June. Installment credit extended to corporates grew 0.8% m/m, rising for the first time following nine consecutive months of contraction. Year on year installment credit extended to corporates has contracted by 4.1%. Mortgage loans extended to corporates in July showed improvement, rising 3.2% m/m and 7.0% y/y. Mortgage loans extension growth to corporates has been slowing down since the start of the year with. Growth in overdraft facilities extended to corporates contracted 2.6% on a m/m basis and rose 17.6% y/y.

 

Banking Sector Liquidity

The average monthly liquidity position of commercial banks closed at N$2.97 billion in July after averaging above N$3.1 billion during May and June. This would suggest that this was the start of the flow of funds received from the AfDB loan to entities owed as was assured by the Ministry of Finance. With all invoices set to have been settled by the end of August. The overall liquidity position still looks positive and bodes well for commercial banks having increased levels of loanable funds available. However, it remains to be seen exactly how commercial banks will put into effect imminent changes to IFRS9. These changes could have potentially significant bearing towards how banks, going forwards grant credit facilities, the term and effective cost thereof to be carried by the consumer.

Reserves and money supply

Foreign reserves rose by N$5.163 billion to N$33.6 billion at the end of July from N$28.5 billion in June. According to the Bank of Namibia the increase in the level of reserves emanated mainly due to the repatriation of funds by financial institutions, the African Development Bank (AfDB) loan inflow and the repayments by the National Bank of Angola.

Outlook

Private sector credit extension remains very subdued continuing to slowdown as the year progresses. The South African Reserve Bank (SARB) cut its repo rate by 25 basis points in July, this however did little to avoid an unexpected slowdown in South Africa’s private sector growth that moderated to 5.71% in July from 6.16% in June. Bank of Namibia (BoN) followed suit in effecting a rate cut of 25 basis points as well, citing the need to support an ailing economy and maintaining the currency peg between the Namibian Dollar and the SA Rand. The improvement in foreign currency reserves does bode well in achieving the its goal of maintaining the peg. Further rate cuts are expecting at MPC meeting in August and September for the SARB and BoN respectively. Should that hold to be true, we might see an increase in private credit extension, since a single reduction of 25 basis points was going to do little to spur on demand for credit. The current slowdown in private credit extension is testament to an already stressed consumer. A scenario that speaks of low consumer and business confidence. A consumer that is already overburdened and may soon face further tightening of credit qualifying criterion, should our expectations of the effects of IFRS9 come to fruition.

Building Plans – July 2017

By | | ,
Comments Off on Building Plans – July 2017

A total of 129 building plans were approved in July, falling by 53 approvals from the 182 recorded in June. In dollar terms approvals fell by N$154.9 million to N$140.9 million in July from N$295.8 million approved in June. Completions showed more encouraging signs, registering 36 completions to the value of N$91.1 million in July. An increase of N$54.5 million from N$36.6 million worth of completions in June. Year to date value of approved building plans currently stands at N$1.60 billion, 41% higher than the corresponding period in 2016. On a twelve-month cumulative basis, 1,856 building plans were approved worth approximately N$2.43 billion, 17.1% higher than the preceding twelve-month period.

Of the total 129 plans approved in July, additions to properties accounted for 105 of those approvals. Additions to properties amounted to 159 in June and perennially make up the majority of approvals, a sign that property owners continue to invest in improvements and extensions to property. Year to date, 860 additions to properties were approved with a value of N$672 million, 21% more in value terms than the corresponding period in 2016.

New residential units accounted for 16 of the total 129 approvals registered in July. Year to date 174 residential units have been approved, 51 more than in the corresponding period in 2016. In dollar terms, N$297.3 million worth of residential plans were approved year-to-date, 14.8% higher than in the corresponding period in 2016. The continued increase in the volume of residential units approved is encouraging and suggests that demand and affordability is present, and consumers should feel some relief with commercial banks set to pass on the effects of the repo rate reduction towards the loans that finance these eventual acquisitions.

The number of commercial and industrial approvals thus far in 2017 amount to 25 units, valued at N$628 million. This compares to 45 units valued at N$322 million approved over the same period in 2016. Eight building plan approvals valued at N$66 million were approved in July. On a 12 month-cumulative basis, commercial and industrial property approvals have risen by 34% in value terms in July compared to the corresponding period in 2016, even though the number of plans approved fell by 23 units.

 

The value of building plan approvals fell by almost 20% y/y for the month of July. However, looking over a 12-month rolling basis, approvals have fared better in July than during the corresponding period in 2016. Approvals increased by 17% on a rolling 12-month basis in value terms in July 2017, N$356 million more than the N$2.08 billion recorded for July 2016.  While the value of building plans completed remains depressed on a year-on-year and 12-month cumulative basis, the corresponding measures of value for building plan approvals point toward some recovery in the construction industry going forward. These developments in building plans follow on the backdrop of a weak economy, and moderating inflation that gave room for the SARB and then Bank of Namibia to reduce their respective repo rates by 25 basis points each. As alluded to earlier, this adjustment to BoN’s policy rate will be followed by commercial banks adjusting lending rates lower. This adjustment in turn provides consumers with relatively slight, but welcome relief.