Category Archives: Economic Research

Economic Research

NCPI May 2023

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Namibia’s annual inflation rate edged up to 6.3% y/y in May, after softening to 6.1% y/y in April. On a month-on-month basis, prices in the overall NCPI basket rose by 0.2% m/m, following the 0.4% m/m increase in April. On an annual basis, overall prices in seven of the twelve basket categories rose at a quicker rate in May than in April, four categories recorded slower rates of inflation while the education category posted steady inflation. Both goods and services inflation edged higher in May, with goods inflation coming in at 8.3% y/y and services inflation at a much more subdued 3.4% y/y.

Inflation Attribution

The Food and Non-Alcoholic beverages basket item was once again the largest contributor to Namibia’s annual inflation rate, contributing 2.4 percentage points in May. Prices of this basket item increased by 0.7% m/m and 12.5% y/y. Most of the sub-categories in this basket category witnessed slower annual inflation in May than in April but prices across the board remain relatively high. Fruits again posted the highest year-on-year inflation at 22.1% y/y in May (April: 29.1% y/y) while prices of items in the sub-category fell by 1.7% m/m. Fish saw the highest month-on month inflation with prices in this subcategory increasing by 4.5% m/m and 13.3% y/y. Oils and fats posted the most notable drop in inflation in May. Prices in this sub-category fell by 1.7% m/m while annual inflation slowed to 0.3% y/y in May (April: 10.7%).

The Alcohol and Tobacco basket item was the second largest contributor to May’s inflation print, contributing 1.0 percentage points. Prices in this basket item rose by 0.7% m/m and 7.5% y/y, slightly up from the 0.6% m/m and 6.7% y/y witnessed in April. Prices of alcohol products rose by 0.7% m/m and 8.4% y/y, while tobacco product prices rose by 0.9% m/m and 3.5% y/y in May. All of the sub-categories in this basket item registered faster annual inflation in May than in April, bar Liqueurs which saw prices deflate by 1.8% y/y.

Transport was the largest contributor to inflation among the remaining basket items, edging Housing, Water, Electricity as one of the top three contributors to Namibia’s annual inflation rate, despite prices in this basket item dropping by 0.6% m/m. Public transport services inflation remained fairly steady at 0.1% m/m and 1.0% y/y. The operation of personal transport equipment inflation rose by 4.7% y/y in May, while the cost of operating personal transport equipment fell 1.1% m/m. The Ministry of Mines and Energy’s decision to lower the price of diesel 50ppm and 10ppm by 80c/litre and 60c/litre, respectively, with effect from June should bring further price relief for this sub-category going forward. Inflation on vehicles purchases slowed to 0.4% m/m and 6.5% y/y, from 1.1% m/m and 6.3% y/y a month earlier.

Outlook

Namibia’s inflation rate witnessed a slight increase in May, primarily driven by food price pressures that persist as a dominant factor in the inflation dynamics.

Despite these developments, it is expected that the annual inflation rate in Namibia will gradually decrease in the coming months. This is primarily due to base effects impacting the Transport category, as fuel prices are now only marginally higher compared to a year ago. However, if currency weakness persists, we could see upward price pressure on goods, resulting in a prolonged period of elevated inflation. The Bank of Namibia is expected to closely monitor these developments, and it may require implementing additional rate hikes beyond current expectations, similar to the situation observed in neighbouring South Africa.

IJG’s inflation model continues to forecast a gradual deceleration in the annual inflation rate over the coming months, before ending the year at around 4.8%.

PSCE – April 2023

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Overall

Private sector credit (PSCE) increased by N$314.9 million or 0.28% m/m in April, bringing the cumulative credit outstanding to N$111.6 billion on a normalised basis (removing the interbank swaps the Bank of Namibia (BoN) accounts for in non-resident private sector claims). On a year-on-year basis, PSCE grew by 2.56% in April, compared to a 3.9% y/y growth rate in March. Over the past 12 months, N$2.79 billion worth of credit was extended to the private sector, 21.6% less than the N$3.55 billion issued over the same period a year ago. Individuals took up N$3.15 billion worth of credit over this period, while corporates deleveraged by N$361.0 million.

Credit Extension to Individuals

Credit extended to individuals rose by 0.2% m/m and 5.0% y/y. All four sub-categories, bar overdrafts, logged growth on a year-on-year basis. ‘Other loans and advances’ attributed to most of the annual credit uptake by individuals. The sub-category, consisting of credit card debt and personal- and term loans, increased by 0.3% m/m and 2.8% y/y in April. Mortgage loans came in second followed by Instalment credit. Mortgage loans to individuals increased by 0.2% m/m and 17.9% y/y in April, while instalment credit extended to individuals rose 2.8% y/y, despite dropping by 0.1% m/m. Overdraft facilities to individuals was the only sub-category that posted a decline on a year-on-year basis, recording a contraction of 0.3% m/m and 1.3% y/y in April.

Credit Extension to Corporates

Credit extension to corporates rose by 0.4% m/m but fell 0.8% y/y after mortgage loan- and overdraft credit uptake by corporates slid over the preceding 12-month period ending in April. Mortgage loans and overdraft facilities to corporates declined by 4.9% y/y and 1.9% y/y, respectively, despite growing by 0.4% m/m and by 0.9% m/m, individually in April. Other loans and advances rose by 0.3% m/m and 0.4% y/y. Instalment credit to corporates came in slightly lower in April than in March but continue to bounce back strong on a year-on-year basis after instalment credit up by corporates grew by 13.4% y/y in May from a low base a year earlier.

Banking Sector Liquidity

The commercial banks overall liquidity position strengthened further during April, rising by N$2.92 billion to an average of N$11.1 billion which is a record high. The Bank of Namibia (BoN) ascribed the increase to improved diamond sales, combined with Heineken’s acquisition of Namibia Breweries. The strong liquidity position resulted in the repo balance pulling back down to zero at the end of April from N$458.4 million at the start of the month.

Money Supply and Reserves

The BoN’s latest monetary statistics show that broad money supply (M2) rose by N$2.32 billion or 1.8% y/y in April. The stock of international reserves increased by 6.7% m/m or N$3.26 billion to N$51.8 billion – the highest level to date and translates to 5.4 months of import cover. The BoN attributed the increase to higher SACU receipts, diamond sales proceeds and FDI inflows in the manufacturing sector arising from the sale of Namibia Breweries Limited to Heineken as well as revaluation gains.

Outlook

Annual PSCE growth slowed in April to the slowest level in 14 months, which was in line with expectations considering the base effect mentioned in IJG’s March PSCE report. The cumulative credit issuance for the past 12 months reached N$2.79 billion in April, marking the lowest level this year.

Corporate credit uptake remains weak in comparison to credit uptake by individuals. This suggests that corporates are more reluctant to borrow under the current conditions, where both economic activity and interest rates are unfavourable for stimulating credit demand for businesses.

Looking ahead, we expect credit uptake to remain modest, as we see little support for increased demand. Considering the marginal impact of May’s base effect, we anticipate that annual PSCE growth figure will remain stable around 2.5% in May. Furthermore, we anticipate a significant boost in foreign reserves due to the sharp depreciation of the Namibian dollar against the US dollar in May. This improvement in the foreign reserve position may provide an opportunity for the BoN to stay on a less aggressive rate hike cycle compared to its counterpart in South Africa, as it seeks to maintain price stability.

New Vehicle Sales – April 2023

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A total of 1,004 new vehicles were sold in April, down 18.11% m/m from the 1,226 vehicles sold in March, but 11.6% more than in April 2022. Year-to-date, 4,138 new vehicles have been sold, of which 2,074 were passenger vehicles, 1,836 light commercial vehicles, and 228 medium- and heavy commercial vehicles. On a 12-month cumulative basis, a total of 11,516 new vehicles have been sold at the end of April, representing an increase of 18.6% y/y from the 9,712 sold over the comparable period a year ago.

April saw 468 new passenger vehicles sold in total, an 18.6% m/m decline, but marginally higher (1.5%) than in the same month a year ago. Year-to-date, new passenger vehicle sales grew to 2,074, an increase of 13.0% compared to the 1,836 vehicles sold over the same period in 2022. On a 12-month cumulative basis, new passenger vehicle sales increased to 5,812, up 20.3% y/y from the 4,831 vehicles sold over the corresponding period a year earlier.

536 new commercial vehicle units were sold in April, representing a 17.7% m/m drop from the 651 units sold in March, but 22.1% more than in April 2022. Light commercial vehicles accounted for 473 of the total commercial vehicles sales in April, medium commercial vehicles sales came in at 17 units, and heavy and extra heavy commercial vehicles sales amounted to 46 units. All three categories witnessed fewer sales in April than in March. On an annual basis, light commercial vehicles sales grew by 20.7% y/y, heavy and extra heavy commercial vehicles sales increased by 53.3% y/y while sales in the medium commercial vehicle category remained steady. Year-to-date, 2,064 commercial vehicles have been sold, of which 1,836 were light commercial vehicles, 77 medium commercial vehicles and 151 heavy and extra heavy commercial vehicles. On a twelve-month cumulative basis, light commercial vehicle sales increased by 20.0% y/y to 4,983 units, medium commercial vehicle sales rose by 23.7% y/y to 235 units while heavy commercial vehicle sales came in at 486 units, representing a contraction of 9.7% y/y.

Toyota continues to show its dominance in the new passenger vehicle sales segment, after taking 38.0% of the market share year-to-date, followed by Volkswagen with 22.4% of the sales year-to-date. Kia and Haval are the best of the rest with 8.3% and 5.1% of the market share, respectively.

Toyota also asserted its dominance in the light commercial vehicle segment after claiming 53.4% of the sales year-to-date. Ford trailed in second place, taking up 12.6% of the market share. Mercedes continues to lead the medium commercial vehicle segment with 31.2% of the market share, while Scania remains on top in the heavy- and extra heavy commercial segment with 29.8% of the market share.

The Bottom Line  

Demand for new vehicles remained relatively strong in April with the 1,004 new vehicles sold being the highest number of units sold in the month of April since 2016. The drop in April’s sales figure from the recent high of last month was somewhat expected as data from recent years suggest a tapering in monthly vehicle sales after peaking in March of each year. The 12-month new vehicle sales cumulative figure has climbed to its highest levels since May 2019 with annual growth in the 12-month cumulative sales showing signs of slowing as the graph above depicts. On a year-to-date basis, vehicle sales continue to trend just above 2018 levels.