Category Archives: Economic Research

Economic Research

PSCE – July 2020

By | | , ,
Comments Off on PSCE – July 2020

Overall

Total credit extended to the private sector (PSCE) decreased by N$476.2 million or 0.46% m/m in July, bringing the cumulative credit outstanding to N$102.24 billion. On a year-on-year basis, private sector credit increased by 1.9% y/y in July, compared to 2.3% y/y in June. This represents the second-lowest level of annual growth on our records dating back to 2002. On a rolling 12-month basis, N$1.919 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$2.755 billion, while corporates decreased their borrowings by N$485.6 million. The non-resident private sector paid back N$350.25 million of total outstanding loans and advances.

Credit Extension to Individuals

Credit extended to individuals showed slowed slightly in July, increasing by and 0.3% m/m and 4.9% y/y. The decrease was largely due to a month-on-month drop in overdrafts outstanding, which declined by 3.4% m/m and grew by only 4.6% y/y. Instalment credit continues to slow, showing zero growth in July and declining by 7.3% y/y or N$502 million. This is largely due to low vehicle sales, which have contracted by 24.8% y/y on a 12-month cumulative basis. Mortgage loans continued to show resilience and were up 0.6% m/m and 5.0% y/y. This translates to a 12-month cumulative issuance of N$1.958 billion over the last twelve months underpinning overall credit extension. However, the other loans and advances category, comprising of shorter-term credit such as personal and card loans, was a major driver of growth increasing by 14.4% y/y adding N$1.119 billion to the total 12-month cumulative issuance.

Credit Extension to Corporates

Credit extended to corporates continued to slow in nearly all the categories as corporates continue to delever, delivering the third month of year-on-year contraction. Total credit extended to corporates decreased by 1.5% m/m and 1.1% y/y, bringing the cumulative 12-month decrease in credit extended to corporates to N$485.6 million. Although showing a growth of 1.5% m/m, mortgage loans were still down by 5.9% y/y. Instalment credit contracted by 1.5% m/m and 10.6% y/y while overdrafts were down by 2.3% m/m and 2.7%y/y. Other loans and advances was the only subcategory which increased on an annual basis, growing by 6.7% y/y and declining by 3.1% m/m.

Banking Sector Liquidity

The average liquidity position of commercial banks declined sharply in July, decreasing by N$1.105 billion to an average of N$2.567 billion. According to the Bank of Namibia, this was primarily due to seasonal corporate tax payments. The value of repurchase transactions increased towards the end of the month but dropped to N$87.5 million by month-end.

Reserves and Money Supply

Broad money supply rose by N$15.06 billion or 13.9% y/y in July, as per the BoN’s latest monetary statistics release. Foreign reserve balances increased notably in July, up 11.5% m/m or N$3.641 billion to a total of N$35.40 billion. According to the BoN, the rise was primarily due to SACU receipts and the third tranche of the AfDB loan disbursed to the Namibian Government during the period under review. Seeing as the Namibian dollar also strengthened relative to the USD from an average of N$17.31 in June to N$16.81 in July, the US dollar value of our reserves increased by 15.0% to US$2.109 billion.

Outlook

Private sector credit extension growth remains subdued at the end of July, down slightly to 1.9% y/y from 2.3% y/y in June. Rolling 12-month issuance has declined to N$1.92 billion, down 72.3% from the N$6.91 billion figure as at July 2019. Lending to individuals has been relatively robust, given the circumstances, showing some growth in the mortgage segment. However, the sharp increase in other loans and advances should be viewed with caution, as this likely indicates that most consumers remain very stretched. On the other hand, the decline is most evident in the corporate sector as economic activity remains muted and businesses remain very cautious during the uncertainty surrounding the pandemic. Current expectations are for interest rates to remain at the current low levels for at least the next 12 months, however low-interest are not enough to spur on lending at the moment and corporates are decreasing their long term debt. Overall, there are very few catalysts for growth at the moment and while uncertainty looms investment will continue to suffer. As a result we not expect to see a recovery in credit extension in the medium term.

New Vehicle Sales – July 2020

By | | ,
Comments Off on New Vehicle Sales – July 2020

A total of 666 new vehicles were sold in July, representing a 13.2% m/m decrease from the 767 new vehicles sold in June, and a 26.3% y/y decline from the 904 new vehicles sold in July 2019. Year-to-date 4,182 vehicles have been sold of which 1,757 were passenger vehicles, 2,156 were light commercial vehicles, and 270 were medium and heavy commercial vehicles. This is 32.8% lower than the total number of new vehicles sold during the same period last year. On a twelve-month cumulative basis, vehicle sales continued to dwindle with a total of 8,357 new vehicle sold as at July 2020, down 24.8% from the 11,119 sold over the comparable period a year ago, and the lowest since June 2005.

227 New passenger vehicles were sold during July, declining by 34.2% m/m. On a year-on-year basis new passenger vehicle sales were 40.6% lower than the 382 units sold in July 2019. Year-to-date passenger vehicle sales rose to 1,757, down 38.4% when compared to the number sold during the same period last year. Twelve-month cumulative passenger vehicle sales fell 4.3% m/m and 27.1% y/y. The demand for new passenger vehicles thus remains very low on the back of the weak economic climate.

A total of 439 new commercial vehicles were sold in July, representing a 4.0% m/m increase, but a 15.9% y/y contraction. This has been the third consecutive month of increases in new commercial vehicle sales which is somewhat encouraging, although the previous two increases were from a low base and the sales figures are still a far cry from those seen five to six years ago. Of the 439 commercial vehicles sold in July, 390 were classified as light commercial vehicles, 14 as medium commercial vehicles and 35 as heavy or extra heavy commercial vehicles. On a twelve-month cumulative basis, light commercial vehicle sales dropped 24.1% y/y, medium commercial vehicle sales fell 6.3%, and heavy commercial vehicle sales contracted by 19.9% y/y. This is the first time since September 2018 that all three these categories have recorded a decrease on a twelve-month cumulative basis.

Volkswagen continues to narrowly lead the passenger vehicle sales segment with 29.5% of the segment sales year-to-date. Toyota retained second place with 29.2% of the market share as at the end of July. They were followed by Kia and Hyundai with 6.4% and 5.6% of the market respectively, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota remained the leader in the light commercial vehicle space with a dominant 56.4% market share, with Nissan in second place with a 13.4% market share. Ford and Isuzu claimed 10.6% and 7.7%, respectively, of the number of light commercial vehicles sold thus far in 2020. Mercedes leads the medium commercial vehicle segment with 31.3% of sales year-to-date. Mercedes was also number one in the heavy and extra-heavy vehicle segment with 21.3% of the market share year-to-date.

The Bottom Line

As expected, the demand for new vehicles remained sluggish in July with only 666 new vehicles sold during the month. New vehicle sales figures are currently trending at levels last seen in 2005. The figures suggest that that vehicle owners are either holding on to the vehicles they already own or are purchasing second hand and imported vehicles. We expect this to remain the case for the medium term as there is currently little indication that economic conditions will improve any time soon. On a rolling 12-month basis new vehicle sales are down 63.1% from the peak in April 2015, and down 24.8% y/y.

NCPI – July 2020

By | | ,
Comments Off on NCPI – July 2020

The Namibian annual inflation rate remained unchanged at 2.1% y/y for a third consecutive month. Prices increased by 0.2% m/m, as inflationary pressures remain muted. On an annual basis, prices in three of the twelve basket categories rose at a quicker rate in July than in June. Two categories remained unchanged, while the rate of price increases in seven categories slowed for the month of July. Prices for goods rose by 2.4%, while prices for services increased by 1.6%.

Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.1 percentage points of the total 2.1% inflation rate. Prices in this category increased by 0.7% m/m and 6.1% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis, with the largest increases being observed in the prices of fruit which increased by 14.7% y/y and vegetables which increased by 14.0% y/y. The prices of meat products recorded a faster increase in prices for seven consecutive months on an annual basis, increasing by 10.6% y/y in July.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in July, with prices of the basket item increasing by 0.8% m/m and 4.5% y/y. Prices for alcoholic beverages increased at a rate of 0.8% m/m and 4.4% y/y, while tobacco prices rose by 0.7% m/m and 4.6% y/y.

The education basket recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6%. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3% y/y. None of the three subcategories printed price increases on a month-on-month basis.

Zonal data shows that on a monthly basis prices increased by 0.2% in the northern zone 1, 0.3% in the central zone and remained steady in the mixed eastern, southern and western zone. On an annual basis, Windhoek and surrounding area, in zone 2, recorded the highest inflation rate at 2.5%, with the mixed zone 3 recording the lowest rate of annual inflation at 1.4%. Inflation in zone 2 (the northern region) slowed to 2.1% y/y.

We expect the Namibian inflation rate to have more or less troughed in the last couple of months. Despite inflationary pressure generally remaining very muted, we do expect a bit of an uptick in Namibian inflation in August after an increase in global oil prices led the Ministry of Mines and Energy to increase the prices of petrol and diesel by 100 cents per litre and 70 cents per litre, respectively, in the beginning of the month. We could see further increases in fuel prices during the rest of the year, depending on the recovery in global oil demand and the exchange rate. Despite the expected acceleration in Namibian inflation, we believe that inflationary pressure will remain relatively contained and that there will be enough room for the Bank of Namibia to cut interest rates further, by between 25-50 basis points at its August monetary policy meeting. IJG’s inflation model forecasts an average inflation rate of 2.1% y/y in 2020 and 3.5% in 2021.