Category Archives: Economic Research

Economic Research

New Vehicle Sales – May 2023

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982 New vehicles were sold in May, down 2.2% m/m from the 1,004 vehicles sold in April, but 27.7% more than in May 2022. Year-to-date 5,120 new vehicles have been sold, of which 2,579 were passenger vehicles, 2,245 light commercial vehicles, and 296 medium- and heavy commercial vehicles. In comparison, 4,314 new vehicles were sold during the first 5 months of 2022, and 4,050 in 2021. On a twelve-month cumulative basis, a total of 11,729 new vehicles were sold at the end of May, representing a 21.0% y/y increase from the 9,691 sold over the comparable period a year ago.

During the month, 505 new passenger vehicles were sold, surpassing the 493 monthly average over the last twelve months. Passenger vehicle sales rose by 7.9% m/m and 25.0% y/y. Of the 17 manufacturers who sold new passenger vehicles in May, 10 recorded a higher number of sales than in April. Year-to-date, 2,579 new passenger vehicles have been sold, 15.1% more than at the same point last year. On a twelve-month cumulative basis, new passenger vehicle sales rose to 5,913, up 21.2% y/y from the 4,877 vehicles sold over the corresponding period a year ago, and the highest 12-month cumulative figure since July 2017. 

A total of 477 new commercial vehicles were sold in May, a decline of 11.0% m/m but 30.7% more than in May 2022. This was the second consecutive month we saw commercial vehicle sales decline, with May’s figure coming in below the monthly average of 485 vehicles observed over the last twelve months. The 12-month cumulative commercial vehicle sales figure however continues to tick up, reaching 5,816 in May, an increase of 20.8% y/y, and the highest since March 2020. Light commercial vehicles continue to make up the bulk of the new commercial vehicle sales with 409 sold in May, followed by 46 heavy and extra heavy commercial vehicles and 22 medium commercial vehicles sold during the month. 

Toyota remains dominant in the new passenger vehicle sales segment with 39.3% of the segment sales year-to-date. The manufacturer has sold just over double the number of new passenger vehicles year-to-date than its closest competitor, Volkswagen. Volkswagen, which is sitting at 19.3% of segment sales year-to-date, is followed by Kia at 8.9%, and Haval and Suzuki, at 5.1% each.

Toyota also maintained its stronghold in the light commercial vehicle segment, claiming 53.3% of the sales year-to-date. Ford is next in line with 13.0% of the market share. Mercedes leads the medium commercial vehicle segment with 36.4% of the market share, while Scania remains on top in the heavy- and extra heavy commercial segment with 29.4% of the segment sales year-to-date

The Bottom Line  

Despite coming in somewhat softer in May, new vehicle sales remain relatively strong, evidenced by the 12-month cumulative figure continuing to tick up month after month and trending around early 2019 levels.  Both passenger and commercial vehicle segments have been recording positive year-on-year growth for 10 consecutive months, with rising interest rates seemingly doing little to dampen demand. 

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.