Category Archives: Economic Research

Economic Research

NCPI July 2021

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The annual Namibian Inflation rate slowed marginally to 4.0% in July, following the 4.1% y/y increase in June. The prices in the overall NCPI basket increased by 0.2% m/m. On a year-on-year basis, the overall prices of seven of the twelve basket categories rose at a quicker rate in July than in June, while three categories experienced slower rates of inflation and two categories posted steady inflation. Prices for goods increased 5.4% y/y while prices for services increased by 2.2% y/y in July.

The transport and food categories were the largest contributors to annual inflation, making up 1.4 and 1.1 percentage points respectively. These were the main drivers of inflation in July. Food prices fell 0.4% m/m but rose 6.1% y/y, with all sub-categories except one increasing on an annual basis. Despite a bumper harvest for some vegetable products, Namibia’s reliance on South Africa for food imports is reflected in the increased prices of meat, oil and fats, and fruit. Increased transport prices have resulted from the recent upward trend in global oil prices and the depreciation of the Namibian dollar against the US dollar, making imports more expensive. 

Alcoholic beverages and tobacco prices contributed 0.3 points to annual inflation, as they did in June, increasing by 0.8% m/m and 2.5% y/y in July. The miscellaneous category also contributed 0.3 percentage points to inflation alongside transport and housing, water and electricity. Driven by higher fuel prices, transport costs have increased by 1.0% m/m and 10.6% y/y in July.

The 4.0% y/y increase in annual inflation is towards the upper end of IJG’s inflation forecast for the year. The main driver of inflation in the last couple of months has been food inflation which has been averaging 6.2% y/y since the beginning of the year. While risks remain to the upside, we see these as muted in the short-term in what is currently a very accommodative global monetary environment. Higher oil prices remain the largest risk in the short-term, while domestic and South African fiscal deterioration pose medium-term risks as debt levels increase unchecked, eating into the already limited productive portion of expenditure. IJG’s inflation model currently forecasts an average inflation rate of 3.7% y/y in 2021 and in 2022. Given that economic growth is expected to be low, and that inflation will likely remain muted, we expect monetary policy to remain accommodative over the short- to medium-term. 

New Vehicle Sales – July 2021

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800 new vehicles were sold in July, a 5.1% m/m decrease from the 843 sold in June. This brings the total number of vehicle sales in 2021 to 5,693. Despite this monthly drop, over the past 12 months total vehicle sales have grown by 8.9% y/y to 9,119 with passenger and light commercial vehicles continuing to make up the bulk of the sales. On a year-on-year basis, new vehicle sales rose 19.4% in July.

389 new passenger vehicles were sold in July, a 9.5% m/m decrease from the 430 sold in June. Year-on-year passenger vehicle sales increased by 68.4%. Year-to-date passenger vehicle sales have increased by 51.5% y/y, as 1,760 vehicles were sold by this time last July compared to the 2,666 figure this year. Beating 2020’s figures should, and is so far proving, to be an easy task. However, new passenger vehicle sales continue to trail the (already low) pre-pandemic levels of 2019. On a 12-month cumulative basis, the number of passenger vehicles sold increased by 18.6% y/y in July.

A total of 411 new commercial vehicles were sold in July, virtually the same number as in June. New commercial vehicle sales have decreased by 6.4% y/y. 376 light, 13 medium and 22 heavy commercial vehicles were sold in this period. While the sale of light commercial vehicles increased by 13.6% from June, the sales of medium and heavy commercial vehicles both declined on a month-on-month basis. On a 12-month cumulative basis, light commercial vehicle sales have increased by 0.4% y/y, medium commercial vehicles fell by 14.9% y/y, and heavy commercial vehicles increased by 28.7% y/y, although the increase is from a very low base.

The ongoing two-way battle between for supremacy in the Namibian commercial and passenger vehicle market between Toyota and Volkswagen rolls on. Volkswagen regained top spot in the year-to-date sale of passenger vehicles with 30% of the market share. Toyota’s market share of passenger vehicles over the same period is 28%. Kia and Hyundai make up 8.5% and 5.7% of the market respectively.  

On a year-to-date basis, Toyota remains the preeminent seller of light commercial vehicles with a 55% share of the market. This is more than four times the share of their nearest competitor, Ford at 13%. Hino and Mercedes each make up 32% of the total medium commercial vehicles sales on a year-to-date basis. The heavy and extra heavy commercial vehicle market is the most competitive of the vehicle markets, with no one seller amassing more than a quarter of total market share.

The Bottom Line  

July’s new vehicle sales figures bear no marked difference to June’s. 2021 remains on track to be the second worst year for vehicle sales in the past decade. By this time in 2019, itself a below par year for vehicle sales over the last 10 years, 6,227 new vehicles were sold, in 2021 that number is only 5,693. Naturally this is an improvement on 2020’s sales figures (4,186 total) but as noted earlier, that is not difficult to accomplish. More tellingly, sales figures for new passenger and commercial vehicles are below pre-pandemic averages, showing that both individual and business spending remains depressed. As vehicle sales and most other high-frequency data is indicating, the economic recovery has a long way yet to go.         

PSCE – June 2021

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Overall

Private sector credit (PSCE) rose by N$300.7 million or 0.29% m/m in June, bringing the cumulative credit outstanding to N$105.31 billion. On a year-on-year basis, private sector credit grew by 2.55% in June, compared to the 2.66% y/y growth recorded in May. On a rolling 12-month basis, N$2.62 billion worth of credit was extended to the private sector. N$2.38 billion worth of credit has been extended to individuals over the past 12 months, while N$334.5 million was issued to corporates. The non-resident private sector decreased their borrowings by N$94.1 million.

Credit Extension to Individuals

Credit extended to individuals increased by 0.4% m/m and 4.04% y/y in June, growing at a slightly quicker pace than the 3.98% y/y increase recorded in May. The month-on-month growth has mostly been driven by an increase in Mortgage loans by individuals which rose by 0.3% m/m and 4.9% y/y. Instalment credit increased by 3.2% m/m and 1.0% y/y, the third consecutive month of increase on an annual basis. Overdraft facilities extended to individuals contracted by 0.9% m/m, but increased by 5.0% y/y. Other loans and advances (OLA) rose by 0.8% m/m and 2.3% y/y.

Credit Extension to Corporates

Credit extension to corporates grew by 0.4% m/m, following four consecutive months of declines. On an annual basis, growth in credit extension to corporates decelerated to 0.8 % y/y in June, compared to the 1.2% y/y growth registered in May. On a monthly basis, mortgage loans and other loans and advances (OLA) rose by 0.4% and 0.2% respectively. Overdraft facilities extended to corporates contracted by 4.6% m/m. On a year-on-year basis, OLA contracted 2.4%, while mortgage loans and overdrafts increased 0.8% and 5.7%, respectively.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved during June, increasing by N$213.4 million to reach an average of N$554.3 million. The BoN attributed the diminishing liquidity position to net transfers by investment managers as well as several cross-border transfers during the period under review. The outstanding balance of repo’s subsequently rose to N$1.7 billion at the last week of the month.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply contracted by N$2.53 billion or 2.0% y/y in in June, compared to the 1.3% y/y decrease recorded in May. Foreign reserve balances increased by N$2.8 billion to N$41.8 billion in June. The BoN ascribed the increase in official reserve stock to the inflow of the AfDB loan and the IMF Rapid Financing Instrument (RFI) during the period under review.

Outlook

The N$300.7 million or 0.3% m/m expansion of PSCE growth in June is the first month-on-month increase since January 2021. The rolling 12-month private sector credit issuance increased 6.9% y/y, with individuals continuing to take up most (90.8%) of the credit extended over the past 12 months.

Mortgage loans by corporates recorded positive year-on-year growth for the first time in 15 months, while overdrafts decelerated to single digits for the first time in 8 months. IJG expects the BoN to leave the repo rate unchanged at the current historically low level until the end of the year, assuming that the inflation forecast for both Namibia and South Africa remains unchanged. This should continue to assist over-indebted individuals and businesses, but as we’ve pointed out in the past, will likely not lead to significant additional credit uptake unless the economic outlook improves meaningfully.