Category Archives: Economic Research

Economic Research

PSCE – February 2022

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Overall

Private sector credit (PSCE) increased by N$2.44 billion or 2.2% m/m in February, bringing the cumulative credit outstanding to N$113.1 billion. On a year-on-year basis, private sector credit grew by 7.1% y/y in February, quicker than the already relatively high 4.8% y/y growth recorded in January. As was the case in January, the growth was primarily driven by a substantial increase of N$2.3 billion in claims on non-resident private sectors. On a 12-month cumulative basis N$7.47 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$1.74 billion, corporates increased their borrowings by N$1.18 billion and the non-resident private sectors took up N$4.56 billion. 

Credit Extension to Individuals

Credit extended to individuals increased by 0.2% m/m and 2.9% y/y in February. As was the case in January, most of the increase was driven by an increase in mortgage loans of 0.2% m/m and 2.9% y/y. Overdraft facilities to individuals fell by 0.5% m/m but rose 1.2% y/y, following the strong growth recorded in January. Other loans and advances (consisting of credit card debt, personal- and term loans) rose by 0.1% m/m and 4.0% y/y during the month.

Credit Extension to Corporates

Credit extended to corporates remained steady in February, following the 3.5% m/m increase recorded in January. On a year-on-year basis, credit extended to corporates grew by 2.7% y/y, the quickest increase since October last year. Overdraft facilities to corporates erased some of the large increase recorded in January, falling by 3.9% m/m and 4.1% y/y. Mortgage loans increased by 1.5% m/m and 5.1% y/y, while instalment credit by corporates rose by 2.8% m/m and 7.8% y/y, albeit from a low base.

Banking Sector Liquidity 

The overall liquidity position of the commercial banks deteriorated slightly during February, falling by N$179.0 million to an average of N$2.68 billion. The BoN ascribed the decline to “funds movement in search of better yields”. The repo balance fell to N$862.6 million at the end of the month after ending January at N$1.53 billion.

Reserves and Money Supply

According to the BoN’s latest monetary statistics, Broad Money Supply (M2) rose by N$2.00 billion or 1.6% y/y to N$127.2 billion. Foreign reserve balances fell by 0.6% m/m or N$271.0 million to a total of N$43.0 billion. The decline was contributed to net commercial bank outflows, which in turn was attributed to an increase in the import bill (specifically in the category of mineral fuels and oils) during the period. We believe that the high fuel prices will continue to put pressure on the foreign reserve position going forward.

Outlook

PSCE posted strong growth for a second consecutive month, with the increase again being driven by a large increase in claims on non-resident private sectors. The BoN ascribed these increases to a loan uptake by one of the commercial banks from its parent company in South Africa. Normalising for these two large increases, sees PSCE growth at 2.5% y/y in January and 2.6% y/y in February, bringing the growth rate roughly in line with the average rate witnessed in 2021. 

We expect the BoN to follow the SARB in hiking the repo rate by 25bps at its April MPC meeting, followed by an additional 3-4 hikes throughout the rest of the year, as inflationary pressure is expected to pick up. Still, even with 25 bp increases at every remaining meeting, interest rates should remain relatively accommodative by historical standards.

Building Plans – February 2022

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The City of Windhoek approved 219 building plans in February, representing a 24.4% m/m increase from the 176 building plans approved in January. In monetary terms, the approvals were valued at N$156.3 million, a 21.5% m/m increase. Year-to-date 395 building plans worth N$285.0 million have got the nod, an increase in number of 15.2% y/y and 14.9% y/y in value terms. On a twelve-month cumulative basis, 2,503 buildings with the value of N$2.00 billion were approved, an increase of 8.9% in number and 18.6% in value terms over the prior 12-month period. 144 building plans worth N$53.1 million were completed during the month.

In terms of both number and value of approvals, additions to properties once again made up the largest portion of approvals. For the month of February 132 additions to properties were approved with a value of N$76.8 million, 1 more than in February 2021. The value of the additions approved is 8.8% higher than during the same month last year. 104 Additions worth N$20.6 million were completed during the month.

New residential units were the second largest contributor to the number and value of building plans approved with 83 approvals registered in February, 9 more than in January. In value terms N$76.2 million worth of residential units were approved in February, a 59.6% m/m increase. On a year-on-year basis the value of approvals is however 17.9% lower than registered in February 2021. On a 12-month cumulative basis the number of residential units approved increased by 17.5% y/y to 860, although this number has been ticking down since May last year when it stood at 933. 40 New residential units worth N$32.6 million were completed in February.

4 New commercial units valued at N$3.6 million were approved in February. This compares to 3 units valued at N$505,000 approved in February 2021. Year-to-date there have been 7 commercial building approvals valued at N$8.8 million, which translates to a 75.0% y/y increase in number and 17.0% y/y increase in value terms compared to the same period last year. These increases are from an evidently low base low base. On a rolling 12-month perspective, the number of commercial and industrial approvals increased to 40 units worth N$172.7 million, compared to the 26 approved units worth N$180.8 million over the corresponding period a year ago. No commercial and industrial units were completed in February.

The 12-month cumulative number of building plans increased by 8.9% y/y in February to 2,503. While this in an increase from the prior 12-month period, it has been hovering around the current level since April last year, showing nearly no meaningful improvement since then. Residential approvals have recorded a decent recovery in 2021 following the slowdown in 2020, but has too stagnated at current levels on a 12-month cumulative basis in both number and value terms since April last year. As pointed out last month, the number of commercial and industrial approvals continues to trend in the low single digit territory and in value terms, commercial approvals have remained below the N$200 million mark on a cumulative 12-month basis for the last 13 months.

NCPI February 2022

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Namibian’s annual inflation rate slowed marginally to 4.5% y/y in February, following the 4.6% y/y increase in prices recorded in January. Prices in the overall NCPI basket increased by 0.2% m/m. On a year-on-year basis, overall prices in two of the twelve basket categories rose at a quicker rate in February than in January, eight recorded slower rates of inflation and two remained steady. Prices for goods increased by 5.5% y/y and prices for services increased by 3.0% y/y.

Transport was the largest contributor to the annual inflation rate in February, with prices in this category increasing by 1.0% m/m and 13.2% y/y. This basket item contributed 1.8 percentage points to the annual inflation rate in February. Prices in all three sub-categories recorded price increases on a year-on-year basis. The operation of personal transport equipment recorded the largest increase in prices of 1.7% m/m and 18.5% y/y. This was largely due to fuel prices being up 33.3% y/y in February.  The purchase of vehicles sub-category recorded slower inflation at 3.7% y/y while the prices of public transportation services rose by 9.6% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, contributed 1.0 percentage point to the annual inflation rate in February. Prices in this basket item rose by 1.0% m/m and 5.4% y/y. All thirteen sub-categories recorded price increases on an annual basis. The biggest increases were recorded in the prices of oils and fats which rose by 13.5% y/y, followed by the prices of fruits, which increased by 12.6% y/y, and meat which increased by 7.2% y/y.

Alcohol and tobacco inflation slowed to 3.5% y/y in February from the 3.9% y/y increase recorded in January. On a monthly basis, prices in the basket item decreased by 0.8%. The alcoholic beverages sub-category recorded a price decrease of 0.6% m/m and up 3.4% y/y. Tobacco prices were down 2.0% m/m but rose 3.8% y/y.

February’s inflation print of 4.5% is the first month of (marginally) slower price increases following five consecutive months of rising inflation. Transport and food costs continue to be the main drivers of Namibian inflation, with the two categories contributing 62% to February’s annual rate.. IJG’s inflation model currently forecasts inflation to average between 3.4% and 5.0% in 2022, although the upper end of the range seems more likely at this stage as risks remain tilted to the upside.