Category Archives: Economic Research

Economic Research

PSCE – October 2022

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Overall

Private sector credit (PSCE) rose by N$104.5 million or 0.1% m/m in October, bringing the cumulative credit outstanding to N$109.6 billion after normalising for interbank swaps accounted in non-resident private sector claims. Year-on-year, private sector credit grew by 3.0% in October, marginally slower than the 3.6% y/y growth recorded in September. On a 12-month cumulative basis, N$3.21 billion worth of credit was extended to the private sector. Of the cumulative issuance, corporates borrowed N$1.37 billion and individuals took up N$2.29 billion.

Credit Extension to Individuals

Credit extended to individuals increased by 0.8% m/m and 3.7% y/y in October. Annual growth in all of the credit lines to individuals picked up in October. Mortgage loans to individuals posted growth of 0.4% m/m and 2.6% y/y. Other loans and advances (consisting of credit card, personal, and term loans) grew by 3.0% m/m and 10.3% y/y, and instalment credit rose by 0.9% m/m and 2.6% y/y. Overdraft facilities to individuals contracted by 1.3% m/m and 0.3% y/y.

Credit Extension to Corporates

Credit extended to corporates contracted by 0.9% m/m but rose by 3.1% y/y in October. The Bank of Namibia (BoN) ascribes the decline to lower credit demand and deleveraging by corporates in the construction and services sectors. All of the credit lines to corporates, bar other loans and advances, saw a deceleration in annual growth in October. Mortgage loans grew by 0.1% m/m but declined 3.3% y/y. Installment credit posted growth of 1.7% m/m and 14.6% y/y. Overdrafts declined by 2.3% m/m and 6.2% y/y. Other loans and advances to corporates contracted by 1.5% m/m but rose 13.2% y/y.

Banking Sector Liquidity

The overall liquidity position of the commercial banks improved in October, rising by N$616.7 million to an average of N$3.33 billion before ending the month at N$3.4 billion. The BoN attributed the improved liquidity position to inflows from government bonds, specifically the redemption of GI22 and interest payments on other bonds.

Money Supply and Reserves

Broad money supply (M2) contracted by N$1.85 billion or 1.8% y/y to N$126.4 billion. According to the BoN, the contraction came on the back of a decline in net foreign assets of the depository corporations as a result of rising government foreign payments, combined with commercial bank outflows for import payments and lower growth in domestic claims. Foreign reserve balances fell by 6.7% m/m or N$3.20 billion to N$44.8 billion in October. The BoN ascribed the decline largely to government payments and commercial bank outflows during the period under review.

Outlook

Annual PSCE growth slowed for the second consecutive month in October. The BoN once again attributed the lower growth in PSCE to lower credit demand and repayments by the corporate sector, specifically corporates operating in the construction and services sectors.

The BoN’s MPC hiked interest rates by 50 basis points in November, bringing the prime lending rate to 10.5% and just 25bps below the highest lending rate of the past decade. The rapidly rising borrowing costs, coupled with the muted economic activity means that PSCE growth will possibly remain subdued in the short-term. On the supply side, we see little change from the current status quo over the near term.

Building Plans – October 2022

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The City of Windhoek approved a total of 262 building plans in October, representing a 10.5% m/m increase from the 237 building plans approved in September. In value terms, the approvals were valued at N$157.4 million, rising 5.3% m/m from the N$149.4 million worth of plans approved in September. Year-to-date, 2,166 building plans worth N$1.57 billion have been approved, up 3.6% y/y in number terms but down 3.6% y/y in value terms than at the same time last year. On a twelve-month cumulative basis, the number of approvals climbed by 2.1% y/y to 2,527 but in value terms declined by 1.9% y/y to N$1.90 billion. A total of 88 building plans worth N$75.8 million were completed in October.

October saw 182 additions to properties approved valued at N$84.6 million, up 7.7% m/m in number terms and 46.6% m/m higher in value terms. Year-to-date 1,444 additions to properties worth N$784.8 million received the nod, representing an 8.9% y/y increase in number terms and a 29.0% y/y increase in value terms. On a 12-month cumulative basis, 1,692 additions to the value of N$929.3 million were approved in October which represents a 7.4% y/y increase in number terms and a 27.7% y/y jump in value terms. 34 Additions worth N$9.94 million were completed in October, notably down from the 52 additions worth N$17.78 million completed in September.

67 New residential units were approved in October, slightly up from the 62 approved in September. In value terms, N$63.2 million worth of residential units were approved during the month, representing a 30.0% m/m rise from the N$48.6 million approved in September but 22.4% lower than a year prior. Year to date, 673 residential units valued at N$631.9 million were approved, representing an 8.2% y/y decline in number terms and a 26.8% y/y contraction in value terms. October saw 780 residential units approved over the last twelve months, registering a 10.0% y/y decline from the 867 units approved a year ago. In value terms, N$806.4 million worth of residential units were approved over the past 12 months, representing a 21.0% y/y decrease. 52 New residential units worth N$62.92 million were completed during October, up 85.1% m/m from the N$33.99 million worth of plans completed in September.

13 New commercial and industrial units valued at N$9.55 million were approved in October. While the number of approvals reached double digits for the first time since February 2020, the value of the approvals was tepid and came in below the monthly average reported for the year thus far. Year-to-date, 49 commercial and industrial buildings valued at N$153.7 million were approved, compared to the 31 commercial buildings worth N$156.8 million over the same period last year. This represents a 58.1% y/y increase in number but a 2.0% y/y drop in value. On a rolling 12-month perspective, 55 commercial and industrial buildings valued at N$168.3 million were approved in October, compared to the 34 approved buildings worth N$193.0 million over the corresponding period a year ago. This represents an increase of 61.8% y/y in number but a 12.8% y/y contraction in value. Only 2 commercial and industrial units worth N$2.98 million were completed in October, a sizable drop from the N$55.7 million worth completed last month.

The 12-month cumulative value of building plans approved dipped slightly in both nominal and inflation-adjusted terms, as shown in the figure above. This was largely led by the 12-month cumulative y/y decline in the value of commercial and industrial approvals as well as residential units approved. The 12-month cumulative value (and number) of residential units approved also contracted for the 7th consecutive month on a year-on-year basis. The cumulative number of building plans approved also dipped slightly in October.

The 12-month cumulative value of plans completed picked up slightly in both nominal and real terms, as displayed below. The cumulative number of building plans completed declined for the 18th consecutive month (year-over-year) to 1,059 in October.

Overall, appetite for new construction remains mute evident from the fact that October recorded the second lowest year-to-date building plan approvals in value terms over the past 10 years, and only marginally higher than the lows of 2020. With high inflation and rising borrowing costs continuing to put pressure on the demand for building construction, 2022 is on course to end with the lowest annual building plan approvals value over the past decade.

NCPI October 2022

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Namibia’s annual inflation rate remained steady at 7.1% y/y in October. On a month-on-month basis, prices in the overall NCPI basket rose 0.2% m/m. On an annual basis, overall prices in five of the twelve basket categories rose at a quicker rate in October than in September, five categories recorded a slower rate of inflation and two recorded inflation rates consistent with those in September. Prices for goods increased by 9.7% y/y, slightly slower than the 9.8% y/y increase reported last month. Prices for services increased by 3.4% y/y, the quickest annual rise since December 2019.

Transport remains the largest contributor to the annual inflation rate, contributing 2.6 percentage points to the annual inflation rate in October. On a month-on-month basis, prices in this basket item declined for a second consecutive month after falling by 0.7% m/m in October. The decline was somewhat expected given the 100c per litre drop in the petrol price that came into effect in early October, following an even larger reduction in overall fuel prices in the month prior. Prices in the operation of personal transport equipment sub-category declined by 1.3% m/m in October while on an annual basis inflation in this category slowed to 26.8% y/y from 30% y/y in September. We expect inflation for this sub-category to pick up again in November following the 198c per litter increase in the price of Diesel that came into effect earlier this month. Prices in the public transportation services sub-category climbed by 0.4% m/m and 6.8% y/y whilst prices in the purchase of vehicles sub-category rose by 0.1% m/m and 3.4% y/y. Overall, prices in the transport basket rose by 17.8% y/y in October.

Food & non-alcoholic beverages were the second biggest contributor to annual inflation, contributing 1.7 percentage points to October’s annual inflation print. Overall, prices in this basket item rose 0.7% m/m and 9.1% y/y. All thirteen sub-categories in this basket item recorded price increases on an annual basis for the 10th consecutive month in October. Oils and fats again saw the largest price increase on an annual basis, rising 25.5% y/y, followed by fruit prices which rose by 21.6% y/y.

Alcohol & tobacco contributed 0.9 percentage points to October’s annual inflation print. Overall prices in the basket category rose by 0.4% m/m and 6.7% y/y, the quickest year-on-year increase since October 2017. The alcoholic beverages sub-category printed inflation of 0.6% m/m and 7.4% y/y, while the prices of tobacco products fell by 0.1% m/m but increase by 3.7% y/y.

Overall, the transport-, food- and alcohol and tobacco categories accounted for 73% of October’s inflation rate and remain the most influential drivers to Namibia’s inflation print, with the other 9 categories contributing the remaining 27%.

Namibia’s October annual inflation print at 7.1% continued to trend above the SARB’s target ceiling of 6.0% for the 4th consecutive month. South Africa by comparison saw its CPI print slow for a second consecutive month in September, but at 7.5% remains notably above the upper limit of the SARB’s target range. We expect both the SARB and the Bank of Namibia (BoN) to maintain a hawkish monetary stance for as long as inflation remains elevated above the target range. November’s diesel price increase will certainly not assist in alleviating inflationary pressures in the short run and may prolong the BoN’s fight in bringing inflation back within acceptable levels. IJG’s inflation model currently forecasts Namibia’s annual inflation rate to stay elevated above the upper target limit for the remainder of 2022, and for it to end the year at around 6.6%.