Category Archives: Economic Research

Economic Research

PSCE – July 2021

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Overall

Private sector credit (PSCE) decreased by N$318.7 million or 0.30% m/m in July. This decrease brings the total cumulative credit outstanding to N$105.0 billion. On a year-on-year basis, private sector credit increased by 2.72%. Over the past 12 months, N$2.78 billion in credit was extended to the private sector. Cumulative 12-month issuance is therefore up 47% from the N$1.89 billion issued by this time in 2020. Individuals have taken up the bulk of this issuance with debts over the past 12 months summing to N$2.18 billion or 78% of the total debt issuance.

Credit Extension to Individuals

Credit extension to individuals increased by 3.69% y/y, but fell by 0.05% m/m in July. This month-on-month decrease was driven by 1.0% m/m and 0.4% m/m contractions in other loans and advances (credit card debt, personal- and term loans) and instalment credit, respectively, offsetting a 0.2% m/m increase in mortgage loans. However, instalment credit expanded by 0.6% y/y in July. Mortgage loans extended to individuals increased by 4.4% y/y, slightly slower than the 4.9% y/y increase recorded in June. Individual overdrafts rose by 8.7% y/y, but by only 0.1% m/m. This comes after overdrafts fell 0.9% m/m in June.

Credit Extension to Corporates

Credit extended to corporates contracted by 0.52% m/m while increasing by 1.78% y/y in July. This year-on-year increase in corporate credit extensions is in keeping with the trend in 2021, with only low single digit increases recorded thus far. Corporate overdrafts rose by 0.4% m/m and 8.7% y/y in July. Instalment credit increased by a more moderate 0.7% m/m and 0.6% y/y. Mortgage loans decreased by 1.7% m/m but rose by 4.4% y/y this July. This month-on-month decrease is unsurprising as new corporate mortgage loan issuance has been sporadic throughout 2021, with only January, April and June seeing month-on-month increases, while February, March and now July have seen month-on-month decreases in issuance.

Banking Sector Liquidity

The overall liquidity position of Namibia’s commercial banks was near enough unchanged in July, rising by only N$555,000 to an average of N$552.8 million. July saw a marked decrease in the balance of repo’s outstanding – as the starting balance outstanding of N$1.65 billion was cut to N$1.02 billion by the end of the month.

Reserves and Money Supply

The Bank of Namibia’s (BoN) latest figures show Broad Money Supply contracting by N$2.28 billion or 1.8% y/y in July after registering successive year-on-year contractions in May and June. As of the end of July, money supply stands at N$121.5 billion. The central bank’s stock of international reserves rose by 2.1% m/m to N$42.6 billion at the end of July. The BoN attributes the boost to the inflow of SACU receipts during the period.

Outlook

After large increases in credit extension to the private sector in the second half of 2020, with total outstanding private sector debt rising from N$102.2 billion in June 2020 to N$105.4 billion in December, PSCE growth in 2021 has been more subdued.  Total PSCE has hovered between N$105.6 billion and N$105.0 billion this year. The marginal 0.30% m/m decrease in July came off the back of a 0.29% increase the previous month. Without making too many bold inferences from the data it suffices to say that macro-economic conditions remain uncertain in Namibia. 

We expect the BoN to mirror South Africa and hold interest rates steady for the remainder of 2021 to aid overindebted consumers and to attempt to stimulate the economy. Namibian individuals continue to take on the most debt in this low-interest rate environment. Until larger businesses are in a financial position, and develop an appetite, to take on more debt it is unlikely that low interest rates and moderate increases in private sector credit extension will have a major positive impact on the macro economy.

Building Plans – July 2021

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The City of Windhoek approved 211 building plans in July, a 77.3% m/m increase from the yearly low of 119 approvals in June. The value of the approvals increased by 13.4% m/m to N$145.6 million, compared to the N$128.4 million recorded in June. 2021 has now seen 1,338 approvals, valued at N$1.09 billion, 19.4% higher in number terms and 12.5% higher in value terms than during the same period last year. The increase is from a low base due to the strict lockdown measures early last year. On a twelve-month cumulative basis, building plan approvals rose by 24.5% y/y to 2,499, while the value of approvals rose 0.7% y/y to N$1.97 billion. A total of 36 completions to the value of N$24.4 million were recorded in July. Year-to-date, 838 building plans, valued at N$449.5 million have been completed, a 23.3% decline in number terms, and a 50.1% contraction in value terms, compared to the same period a year-ago.

Additions to properties made up most approvals. In July, 137 additions valued at N$64.9 million were approved, breaking a two-month streak of consecutive declines in both number and value terms. Year-to-date, 818 additions have been approved with a value of N$408.9 million, a 4.9% decrease in number, but a 4.9% y/y increase in value terms. Only 6 additions to properties were completed in July at a value of N$3.27 million, a 80.4% m/m decrease in value.

New residential units were the second largest contributor to the number of building plans approved with 73 approvals registered in July, 22 more than in June. In value terms, N$80.4 million worth of residential units were approved in July, a 4.0% m/m and 11.2% y/y increase. So far in 2021 500 units worth N$610.8 million have been approved. This translates to a year-to-date increase in value of 93.6% . On a 12-month cumulative basis the number of residential units approved increased by 146.6% y/y and by 86.3% y/y in value terms. 30 new residential units worth N$21.1 million were completed in July.

Only one commercial unit, valued at N$280,000 was approved in July. This brings the total number of commercial buildings approved in 2021 to 20, at a value of N$67.4 million. While 30 commercial buildings, valued at a N$137.6 million, have been approved in the last 12 months, no commercial units were completed for the fourth month running. Year-to-date, commercial and industrial completions account for only 1.3% of the total value of completions, well below the pre-pandemic 2019 average contribution.   

On a 12-month cumulative basis, the number of building plans approved increased by 24.5% y/y. This increase is however from a low base. 2,499 building plans to the value of N$1.97 billion were approved in the last 12 months, representing a 0.7% y/y increase in value. Additions to properties made up 63.9% of the cumulative number of approvals, but only 36.3% of the total value of approvals. Commercial and industrial building plan approvals are on course to be even lower in 2021 than in 2020 with only 20 approvals worth N$67.4 million thus far, compared to 31 approvals worth N$261.0 million at the same point last year. As building plan approvals is a forward-looking measure of expected construction activity this does not bode well for economic activity in the capital in general. The construction industry thus remains fragile.

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.