Category Archives: Economic Research

Economic Research

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.

Building Plans – June 2021

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The City of Windhoek rubber stamped 119 building plans in June, the lowest for the year and 55.9% lower than the 187 approvals in May. The value of the approvals fell by 25.7% m/m to N$128.4 million, compared to the N$173.0 million recorded in May. The first half of 2021 has seen 1,127 approvals, valued at N$941.5 million, 28.7% higher in number terms and 14.1% higher in value terms, than during the same period last year. The increase is however from a low base, following the strict lockdown measures early last year. On a twelve-month cumulative basis, building plan approvals rose by 30.4% y/y to 2,533, while the value of approvals rose 1.9% y/y to N$1.97 billion. A total of 124 completions to the value of N$58.6 million were recorded in June. Year-to-date, 802 building plans, valued at N$425.1 million have been completed this year, representing a 4.4% decline in number terms, and a 25.7% contraction in value terms, compared to the same period a year-ago, when construction activity halted for one out of the first six months.

In terms of the number of approvals, additions to properties once again made up the majority of approvals. Only 65 additions, worth  N$35.1 million were approved in June, representing a third consecutive month of decline in both number and value terms. 73 additions worth N$16.6 million were completed in June, representing a decrease in value of 40.8% m/m.

New residential units were the second largest contributor to the number of building plans approved with 51 approvals registered in June, 27 fewer than in May. In value terms, N$77.3 million worth of residential units were approved in June, a decrease of 16.5% m/m, but an increase of 6.9% y/y. In the first half of 2021, 427 new residential units were approved worth N$530.4 million, representing a 168.6% y/y increase in number and 118.0% y/y increase in value. This increase is however from a very low base, and shows just how severe last year’s contraction was. On a 12-month cumulative basis the number of additions approved has increased by 176.0% y/y as well as by 103.4% y/y in value terms. 51 new residential units worth N$41.9 million were completed during the month.

Three commercial units, valued at N$16.0 million got the nod in June, translating to a 16.5% m/m decrease in value terms. Nineteen commercial buildings, valued at N$67.1 million were approved in the first half of 2021. Despite the 32 approvals, valued at N$146.1 million in the last 12 months, no commercial units were completed for the third consecutive month. Year-to-date, commercial and industrial completions have accounted for 1.3% of the total value of completions, cementing the first half of 2021 as the worst 6 months in the last 31 years.

The 12-month cumulative number of building plans approved increased by 30.4% y/y in June, although the increase came from a low base. A total of 2,533 building plans to the value of N$1.97 billion were approved over the last 12 months, representing an increase in value of 1.9% y/y. Additions to properties have made up 62.9% of the cumulative number of approvals, but only 36.2% of the total value of approvals. Completed building plans increased 9.5% y/y in value terms to N$1.39 billion on a 12-month cumulative basis in June. Overall, each sub-category of completions as well as approvals experienced contractions in number terms compared to last month, indicating that construction activity will remain subdued over the short- to medium term.

NCPI – June 2021

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The annual Namibian inflation rate accelerated to 4.1% in June, following the 3.8% y/y uptick in prices in May. The prices in the overall NCPI basket increased by 0.5% m/m. On a year-on-year basis, overall prices in three of the twelve basket categories rose at a quicker rate in June than in May, while five categories experienced slower rates of inflation and four categories posted steady inflation. Prices for goods increased 5.5% y/y while prices for services accelerated to 2.1% y/y in June, compared to the 1.3% y/y increase recorded in May.

The food and transport categories were the largest contributors to annual inflation, making up 1.3 percentage points each of the annual inflation rate and together were the main drivers of inflation in June. Transport prices rose 2.5% m/m and 9.6% y/y. The Road User Levy increased by seven cents per litre in June, contributing to higher fuel prices, which have already been on the rise from the low base a year ago. The Rand also weakened against the US Dollar during June, which further elevated fuel prices.

Food prices rose 0.3% m/m and 7.3% y/y, with prices in all thirteen sub-categories increasing on an annual basis. Namibia is relatively dependant on South Africa for food imports, which would have experienced a spillover effect from the increased transport costs, as well as near all-time high fuel costs in South Africa. The largest increases were witnessed in the oils and fats sub-category, which recorded a 16.7% y/y increase, followed by meat, which posted a 16.0% y/y increase in prices and vegetables, which rose 6.8% y/y. 

Alcoholic beverages and tobacco prices contributed 0.3 points to the annual inflation rate, increasing by 0.4% m/m and 2.5% y/y in June. The miscellaneous category also contributed 0.3 points to the annual inflation rate, although decreasing by 0.2% m/m, the category rose posted a price increase of 6.4% y/y.

The 4.1% y/y increase in annual inflation is at the upper-end of IJG’s inflation forecast for the year, as we expect inflation to average 3.8% y/y in both 2021 and 2022. Rising inflation rates have also been witnessed recently in South Africa and, as such, the South African Reserve Bank imposing rate hikes this year is not an impossibility, however, monetary policy is expected to remain accommodative. The Bank of Namibia is expected to follow suit to whichever strategy the SARB pursues. Overall, we expect the annual inflation rate to remain near the mid-point of the SARB’s inflation range for the rest of the year.