Category Archives: Economic Research

Economic Research

NCPI – May 2021

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The Namibian annual inflation rate slowed to 3.8% y/y in May, with prices in the overall NCPI basket increasing by 0.3% m/m. On a year-on-year basis, overall prices in three of the twelve basket categories rose at a quicker rate in May than in April, while six of the basket categories recorded slower rates of inflation, and three of the basket categories posted steady inflation. Prices for goods increased by 5.6% y/y while prices for services rose by 1.3% y/y.

Food & non-alcoholic beverages, the second-largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.2 percentage points of the total 3.8% inflation rate in May. Prices in this category increased by 0.7% m/m and 6.6% y/y. Prices in all thirteen of the sub-categories recorded increases on an annual basis, with five recording slower increases. The largest increases were observed in the prices of meat which increased by 16.9% y/y, fruit which rose by 8.5% y/y and oils and fats, which climbed by 13.5% y/y, significantly higher than the 7.5% y/y increase in April. This is the fifth consecutive month the prices of fruits subcategory recorded a slower annual price increase.

Transport was the second-largest contributor, accounting for 1.0 percentage points of annual inflation in May. Prices in the category rose 0.6% m/m and 7.3% y/y, fuelled by the operation of personal transport equipment sub-category, which rose 0.1% m/m and 13.0% y/y. This has been the result of several hikes in local fuel prices since the start of the year, due to a recovery in global oil prices from the record lows observed a year ago. Due to base effects, the public transportation services sub-category notably recorded price declines 11.6% y/y.

The alcoholic beverages and tobacco basket item was the third-largest contributor to the annual inflation rate in May, with prices increasing by 3.5% y/y. On a monthly basis, prices in this basket item fell by 0.2%. The alcoholic beverages sub-category recorded a price decrease of 0.2% m/m and 2.5% y/y. Tobacco prices rose 0.1% m/m, and 7.9% y/y.

The housing and utilities and miscellaneous categories accounted for 0.35 and 0.36 percentage points, respectively, of the total annual inflation rate in May. Price inflation for housing and utilities remained unchanged on a monthly basis, for the fourth month in a row, but rose 1.3% y/y. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 7.7% y/y. Prices in the electricity, gas and other fuels subcategory rose 1.0% y/y, while the annual inflation for rental payments stood at 1.3% y/y.

Namibia’s inflation remains relatively contained, with May recording disinflation for the first time since November last year. The current surge in Covid-19 cases in Namibia poses a concern for the economy. Overall, lower business and consumer confidence is expected to translate into muted economic growth, which should place a cap on inflation levels for the rest of the year. IJG’s inflation model forecasts an average inflation rate of 3.6% y/y in both 2021 and 2022. As uncertainty grows with the rising infections, it is unlikely that interest rates will change from 3.5% at the next SARB monetary policy committee meeting on the 22nd of July, with the Bank of Namibia likely to follow by maintaining its rate at 3.75%.

New Vehicle Sales – May 2021

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May observed 792 new vehicle sales, an increase of 4.9% m/m from the 755 vehicles sold in April. As at 31 May, 4,052 new vehicles were sold for the year, of which 1,849 were passenger vehicles, 1,887 light commercial vehicles, and 316 medium and heavy commercial vehicles. By comparison, the first five months of 2020 saw 2,750 new vehicles sold. On a twelve-month cumulative basis, a total of 8,914 new vehicles were sold as at May 2021, representing a 1.1% expansion from the 8,820 sold over the comparable period a year ago, though 22.9% lower than at May 2019.

A total of 360 new passenger vehicles were sold during May, a slight uptick of 0.6% from the 358 passenger vehicles sold in April. Year-to-date, passenger vehicle sales rose to 1,849, 56.0% higher than during the same period in 2020, but 11.7% lower than at May 2019. On a rolling 12-month basis, passenger vehicle sales rose to 3,874, 6.0% higher than in May 2020, and 23.2% lower than in May 2019.

A total of 432 new commercial vehicles were sold in May, representing an increase of 8.8% m/m. 371 Light commercial vehicles, 15 medium commercial vehicles, and 46 heavy and extra heavy commercial vehicles were sold during the month. Light commercial vehicle sales rose 15.2% m/m, medium commercial vehicle sales posted a second consecutive month of declines, dropping 25.0% m/m, and heavy commercial vehicle sales decreased by 16.4% m/m. On a twelve-month cumulative basis, light commercial vehicle sales have declined by 2.1% y/y, medium commercial vehicles fell by 30.2% y/y, and heavy commercial vehicles entered positive territories for the first time since April, last year, increasing by 10.8% y/y.

Although Volkswagen continues to lead in the new passenger vehicle sales segment, its market share declined from 34.7% last month to 31.2% of sales year-to-date, followed by Toyota whose market share rose to 25.3% from 24.9% a month ago. Kia and Suzuki continued to trail, with 8.7% and 6.2% of the market, respectively, leaving the remaining 18.1% of the market to other brands.

On a year-to-date basis, Toyota continued as the leader in the light commercial vehicle space with a 54.0% market share, Nissan maintained second place with a 13.5% market share. Ford and Isuzu claimed 13.1% and 5.8%, respectively, of the number of light commercial vehicles sold thus far in 2021. Mercedes surpassed Hino as the leader in the medium commercial vehicle segment with 33.3% of sales year-to-date. Scania remained number one in the heavy and extra-heavy commercial vehicle segment with 23.8% of the market share year-to-date.

The Bottom Line

The number of total new vehicle sales has ticked up every month this year on a year-on-year basis, all but confirming an ongoing recovery in vehicle sales. This is further evidenced by average monthly vehicle sales for 2021 standing at 810, compared to the 634 in 2020. Furthermore, the cumulative 12-month new passenger vehicle sales have been on the rise on a month-on-month basis for 6 consecutive months, indicating improvements in consumer confidence. Despite the glimmers of recovery, total vehicle sales still lag the pre-Covid-19 era, when an average of 868 sales were made per month in 2019. Interestingly, monthly passenger vehicle sales for 2021 have averaged 370, slightly below the average of 380 recorded in 2019. This indicates that it is the commercial sector that has been impacted the hardest by the pandemic and continues to struggle. This year’s monthly average commercial vehicle sales are 9.6% lower than an already low base of 488 in 2019, which indicates muted activity in Namibia’s commercial sector, as few new businesses enter the scene, while existing businesses rely on their existing vehicles instead of expanding their fleet.

PSCE – April 2021

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Overall

Private sector credit (PSCE) fell by N$41.3 million or 0.04% m/m in April, bringing the cumulative credit outstanding to N$105.2 billion. On a year-on-year basis, private sector credit grew by 2.74% in April, compared to the 1.55% y/y growth recorded in March. On a rolling 12-month basis, N$2.81 billion worth of credit was extended to the private sector. N$2.30 billion worth of credit has been extended to individuals on a 12-month cumulative basis, while N$880.0 million was issued to corporates. The non-resident private sector decreased their borrowings by N$369.0 million.

Credit Extension to Individuals

Credit extended to individuals increased by 3.91% y/y in April, compared to the increase of 2.57% y/y recorded in March. On a monthly basis, household credit grew by 0.6%, following the increase of 0.4% m/m recorded in March. Mortgage demand by individuals remained relatively strong, increasing by 0.6% m/m and 5.2% y/y. Instalment credit increased by 0.7% m/m, and by 0.5% y/y, making April the first month since July 2019 to record an uptick on a year-on-year basis. Overdraft facilities extended to individuals have increased by 1.8% m/m and 4.2% y/y. Other loans and advances (OLA) rose by 0.8% y/y and 0.2% m/m, displaying a decline in demand amongst individuals over the last 16 months, from the 65.6% y/y increase in January 2020.

Credit Extension to Corporates

Credit extension to corporates contracted for a third consecutive month, on a month-on-month basis, declining by 0.8% m/m, following the 1.1% m/m contraction recorded in March. On an annual basis, however, credit extension to corporates recorded low growth of 2.1% y/y in April, compared to the 1.2% y/y growth registered in March. Mortgage loans to corporates expanded by 0.4% m/m, other loans and advances (OLA) contracted 2.2% and overdrafts rose 0.9% m/m. On a year-on-year basis, mortgage loans contracted 2.0%, while OLA and overdrafts increased 1.3% and 13.5% respectively.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved during April, increasing by N$376.0 million to reach an average of N$3.0 billion. According to the BoN, the improvement in the liquidity position was largely due to higher inflows of funds by pension funds in adherence to domestic asset requirements as well as proceeds from minerals sales during the period under review. The outstanding balance of repo’s stood at zero for thirteen out of the twenty business days in April and rose to N$591.3 million in the last week of the month.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$3.8 billion or 3.1% y/y in April, compared to the 9.4% y/y increase recorded in March. Foreign reserve balances rose by N$6.5 billion to N$41.2 billion in April. The BoN ascribed the rise in official reserve stock to inflows in the form of the IMF Rapid Financing Instrument (RFI), SACU receipts, as well as foreign currency purchases by the BoN during the period under review.

Outlook

Overall, PSCE growth remains subdued, decreasing by N$41.4 million or 0.04% m/m in April, resulting in a second consecutive month of negative growth. The rolling 12-month private sector credit issuance is down 15.5% from the N$3.32 billion cumulative issuances as at the end of April 2020, with individuals taking up most (81.8%) of the credit extended over the past 12 months.

We expect the Bank of Namibia to leave interest rates unchanged at their historically low levels at its April MPC meeting, which will continue to accommodate indebted consumers and corporates. However, the lack of confidence in the economy is evidenced by corporates exploiting the low rates to de-lever their balance sheets rather than using the opportunity to expand their financial positions. As a result, the contracted interest rates alone are unlikely to drive PSCE growth. The lacklustre PSCE statistics reflect the nation’s poor recent economic performance of late, as it reflects both lower consumption spending as well as lower investments by corporates, two vital components of GDP. With few drivers for economic growth, a recovery in credit extension is unlikely in the short term.