Category Archives: Economic Research

Economic Research

NCPI March 2022

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Namibian’s annual inflation rate remained steady at 4.5% in March. Prices in the overall NCPI basket increased by 0.6% m/m. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in March than in February, with five categories recording slower rates of inflation and three categories recorded consistent with the prior month. Prices for goods increased by 5.7% y/y while prices for services increased by 2.9% y/y in March.

Transport was rather unsurprisingly the largest contributor to the annual inflation rate in March, contributing 1.9 percentage points to the total 4.5% y/y inflation rate. Overall prices in this basket item increased by 2.6% m/m and 13.8% y/y. All three sub-categories in this basket item recorded higher inflation on a year-on-year basis. The operation of personal transport equipment sub-category recorded the largest increase in prices of 4.1% m/m and 19.2% y/y, following the Ministry of Mines and Energy’s decision to increase petrol and diesel prices by 120- and 130 cents per litre, respectively, in March. Price of public transportation services rose by 9.8% y/y, marginally quicker than the 9.6% recorded in February, while the purchase of vehicles sub-category recorded inflation of 4.0 % y/y . We expect transport inflation to remain high over the medium term, as global oil supply remains tight amid the Ukraine crisis. 

Food & non-alcoholic beverages, the second largest basket item by weighting, contributed 0.9 percentage points to the annual inflation rate in March. Overall, prices in this basket item rose by 0.4% m/m and 4.6% y/y. All thirteen sub-categories recorded price increases on an annual basis. The largest increases were recorded in the prices of oils and fats which rose by 15.6% y/y, followed by the prices of fruits, which increased by 10.0% y/y, and  the ‘food’ sub-category which increased by 4.7% y/y. 

Prices in the alcohol and tobacco category, the third largest basket item by weighting, increased 4.1% y/y in March. On a monthly basis, prices in the basket item increased by 0.4%, following a 0.8% m/m decrease in February. The prices of alcoholic beverages increased 0.3% m/m and 4.1% y/y while tobacco prices rose by 0.7% m/m and 4.1% y/y.

Namibia’s annual inflation remains above its 12-month average of 4%. While March’s annual inflation rate of 4.5% remained unchanged from last month, the risk of rising inflation is high given the upward pressure expected on fuel and food prices, coupled with the fact that it is unlikely that interest rate hikes by the Bank of Namibia will significantly dampen these inflationary pressures in the near term. Transport and food remain the primary drivers of Namibian’s inflation, contributing 62% to country’s annual inflation rate in March. IJG’s inflation model currently forecasts inflation to average between 4.4% and 5.1% in 2022 with the upper end of the range more likely to materialise.

New Vehicle Sales – March 2022

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1,054 new vehicles were sold in March, which is 175 more than were sold in February and represents a 14.7% y/y increase from the 919 vehicles sold in March 2021. March’s sales figure is the first time since May 2019 that new vehicle sales have surpassed the 1,000 level. 2,645 new vehicles were sold during the first quarter, of which 1,375 were passenger vehicles, 1,099 light commercial vehicles, and 171 medium- and heavy commercial vehicles. By comparison, the first three months of 2021 saw 2,505 new vehicles sold. On a 12-month cumulative basis, a total of 9,568 new vehicles were sold as at March 2022, representing an increase of 21.2% y/y from the 7,896 sold over the comparative period a year ago, although it should be noted that this growth rate has been slowing since December last year.

529 new passenger vehicles were sold during March, an increase of 20.5% m/m from the 439 sold in February, and an increase of 44.5% y/y from the 366 vehicles sold in March 2021. Year-to-date, passenger vehicle sales rose to 1,375 in the first quarter, 21.6% higher than during the same period in 2021 and 45.0% higher than the first quarter of 2020. On a 12-month cumulative basis, new passenger vehicle sales have increased by 39.3% y/y to 4,728.

A total of 525 new commercial vehicles were sold in March, a representing an increase of 18.2% m/m but a decline of 5.1% y/y. The month-on-month increase was driven by a strong increase in light commercial vehicle sales, while both the medium- and heavy commercial vehicle subcategories recorded fewer sales than the preceding month. Light commercial vehicle sales fell 4.9% y/y, medium commercial vehicle sales dropped by 37.5% y/y while heavy commercial vehicle sales rose by 13.2% y/y.  On a twelve-month cumulative basis, light commercial vehicle sales have increased by 3.3% y/y to 4,083, medium commercial vehicles rose by 20.6% y/y to 193, and heavy commercial vehicles climbed by 44.6% y/y to 564.

Toyota continue to enjoy a strong lead in the new passenger vehicle sales segment, claiming 38.9% of the on a year-to-date basis, followed by Volkswagen with a 19.3% share and slightly up from the previous month. They were followed by Kia and Suzuki with 7.3% and 4.9% of the market, respectively, leaving the remaining 29.5% of the market to other brands.

On a year-to-date basis, Toyota remained the leader in the light commercial vehicle space with a 60.9% market share and an increase from the previous month. Nissan came in second place claiming a market share of 10.3%, also slightly higher than in the previous month. Hino remain the leader in the medium commercial vehicle space claiming 36.1% of the market share, followed by Toyota with a market share of 19.4%. Scania remained number one in the heavy and extra-heavy commercial vehicle segment with 30.4% of the market share year-to-date.

The Bottom Line  

As mentioned earlier, March’s sales figure is the first time since May 2019, that monthly new vehicle sales have surpassed the 1,000 level. It is worth noting that March new vehicle sales generally have a seasonal effect of being slightly higher than the surrounding months. Due to this seasonal effect, we expect to see monthly new vehicle sales to return to the levels witnessed in the last 18 months. On a 12-month cumulative basis, new passenger vehicle sales continued to increase, rising for the 16th consecutive month. On a monthly basis, new commercial vehicle sales encouragingly continued to tick up for a third consecutive month, although the March seasonal effect likely played a role here as well. 12-month cumulative new commercial vehicle sales have remained steady at the 4,100 level since April last year.  

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.