Category Archives: Economic Research

Economic Research

PSCE – August 2020

By | | ,
Comments Off on PSCE – August 2020

Overall

Total credit extended to the private sector (PSCE) increased by N$774.1 million or 0.76% m/m in August, bringing the cumulative credit outstanding to N$103.0 billion. On a year-on-year basis, private sector credit extension increased by 2.2% in August, somewhat quicker than the 1.9% growth recorded in July. On a rolling 12-month basis N$2.23 billion was extended to the private sector, with individuals taking up N$2.41 billion while N$188.9 million was extended to corporates. The non-resident private sector decreased borrowings by N$366.7 million.

Credit Extension to Individuals

Credit extended to individuals remained steady m/m, but increased by 4.3% y/y. The only category which recorded positive growth on a monthly basis was mortgage loans, which grew by 0.3% m/m and 4.4% y/y. Over the last twelve months N$1.73 billion worth of mortgage loans were extended to individuals, making up the majority of overall credit extended over the period. Instalment credit and leasing transactions (which have been combined as a category by the BoN) contracted by 0.4% m/m and 6.3% y/y, also reflected in the low demand for new vehicles. The other loans and advances category, comprising of shorter-term credit such as personal and card loans declined by 0.9% m/m, but rose by 12.4% y/y.

Credit Extension to Corporates

Credit extended to corporates grew by 1.8% m/m and 1.7% y/y in August, following the 1.5% m/m and 1.2% y/y contraction in July. The growth was mostly driven by increased demand of overdraft facilities by corporates, as the category recorded relatively strong growth of 6.5% m/m and 6.7% y/y. Mortgage loans extended to corporates contracted by 0.8% m/m and 6.3% y/y. The persistent contraction in installment credit continued in August, declining by 1.2% m/m and 11.6% y/y. Corporates continued to rely on short-term credit with the other loans and advances recording growth of 1.6% m/m and 5.3% y/y in August.

Banking Sector Liquidity

The overall liquidity position of commercial banks declined by N$341.1 million in August to reach an average of N$2.23 billion. The Bank of Namibia attributed the decline to an increase in net ZAR outflows as well as investments into government debt instruments. The outstanding balance of repo’s increase from N$429.8 million at the start of August to N$899.8 million by month end.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$12.6 billion or 11.3% y/y in August. Foreign reserve balances fell by N$2.01 billion or 5.7% m/m to N$33.4 billion in August. According to the BoN, the decline in foreign reserves was mainly due to net Rand purchases by commercial banks as well as increased foreign payments by the government during the month.

Outlook

As expected, the various rate cuts by the BoN thus far this year have not led to a significant increase in uptake of credit. With economic activity remaining very low and banks being prudent in extending credit, most of the credit uptake in August has been short-term borrowings by corporates. Continued reliance on short-term credit is a sign of businesses that are under financial pressure as short-term credit is not typically used to invest in capital projects. The uptake in mortgage loans by individuals is somewhat encouraging, although it could simply be that individuals are taking advantage of the low interest rate to borrow against their existing home loans as it is a relatively cheap source of funding. There are very few catalysts for economic growth at present, and as a result we do not expect to see a recovery in credit extension in the short term.

NCPI – August 2020

By | | ,
Comments Off on NCPI – August 2020

The Namibian annual inflation rate ticked up slightly to 2.4% y/y in August, following the 2.1% y/y increase in prices recorded in July. Prices in the overall NCPI basket increased by 0.4% m/m. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in August than in July, with six categories recording slower rates of inflation and two categories recording increases consistent with the prior month. Prices for goods increased by 3.1% y/y while prices for services rose 1.5% y/y.

The food & non-alcoholic beverages category was the largest contributor to annual inflation in August, accounting for 1.2 percentage points of the total 2.4% annual inflation rate. The category recorded price increases of 1.2% m/m and 6.8% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis. The largest increases were observed in the prices of fruits which increased by 18.1% y/y and vegetables which increased by 12.3% y/y. The prices of meat products recorded a somewhat slower increase in prices at 9.9% y/y after seven consecutive months of faster increases on an annual basis. The rate of increase for this sub-category remains relatively elevated compared to average inflation of 2.8% over the last 12 months. On a monthly basis, the bread and cereals category recorded the highest inflation at 2.0% m/m, followed by fish which recorded an increase of 1.7% m/m.

Alcoholic beverages and tobacco prices, making up approximately 12.6 of the overall inflation basket, was the second highest contributor to the annual inflation rate in August, with prices of the basket item increasing by 3.6% y/y. On a month-on-month basis prices of the basket item fell by 0.7% m/m. Prices for alcoholic beverages fell by 0.8% m/m, but rose 3.4% y/y, while tobacco prices increased by 0.3% m/m and 4.7% 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.

The NSA’s regional CPI data shows that on a monthly basis prices increased by 0.5% in the northern zone 1, 0.4% in the central zone and 0.3% in the mixed eastern, southern and western zone. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the highest inflation rate at 2.9% y/y in August, with the mixed zone 3 recording the lowest rate of annual inflation at 1.5% y/y. Inflation in the northern region ticked up to 2.5% y/y.

As expected, the Namibian inflation rate recorded a slight uptick to 2.4% y/y in August. Inflationary pressure thus remains weak and continues to trend below South African inflation. The main driver of inflation in the last couple of months has been food inflation which has been averaging 4.3% y/y since the beginning of the year. The increase in fuel pump prices in August had a rather muted effect on overall inflation as fuel prices still remain lower than at the same time last year. 

IJG’s inflation model forecasts an average inflation rate of 2.3% y/y in 2020 and 3.8% y/y in 2021. The biggest risk to our inflation forecast is global oil prices, although a large increase in prices seems unlikely at this point seeing that OPEC had again revised its forecast for global oil demand down by another 400,000 barrels per day to 90.2 million barrels per day. We do not expect landlords to push up rental prices any time soon either as many consumers will not be able to afford it and landlords will want to keep vacancies to a minimum. With these being the larger categories of the inflation basket, we thus do not foresee any sudden increases in Namibian inflation in the short-term.

New Vehicle Sales – August 2020

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

593 New vehicles were sold in August, an 11.0% m/m contraction from the 666 vehicles sold in July, and a 26.6% y/y decline from the 808 new vehicles sold in August 2019. Year-to-date 4,776 vehicles have been sold of which 1,962 were passenger vehicles, 2,479 were light commercial vehicles, and 218 were were medium and heavy commercial vehicles. On an annual basis, twelve-month cumulative new vehicle sales continued on a downward trend with 8,142 new vehicles sold over the last twelve months, a 25.0% y/y contraction from the corresponding period last year.

A total of 205 new passenger vehicles were sold during August, representing a 9.7% m/m and 43.1% y/y contraction. Year-to-date passenger vehicle sales rose to 1,962 units, down 39.0% when compared to the year-to-date figure recorded in August 2019. On a rolling 12-month basis, passenger vehicle sales are at their lowest level since July 2004, highlighting the severity of the slowdown in sales.

Commercial vehicles sales reflect a similar picture, declining by 26.4% year-to-date and 21.7% y/y on a rolling 12-month basis. 388 New commercial vehicles were sold in August, a contraction of 11.6% m/m and 13.4% y/y. 323 Light commercial vehicles, 21 medium commercial vehicles, and 44 heavy and extra heavy commercial vehicles were sold during the month. On a twelve-month cumulative basis, light commercial vehicle sales dropped by 23.1% y/y, medium commercial vehicle sales fell 11.8% y/y, and heavy commercial vehicle sales contracted by 10.2% y/y. 

During the month, Toyota retook the lead from Volkswagen in terms of year-to-date market share of new passenger vehicles sold. Toyota claimed 28.7% of the market, followed closely by Volkswagen with 28.3% of the market. They were followed by Kia and Hyundai with 6.5% and 6.0% 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 robust 57.2% market share, with Nissan in second place with a 12.7% share. Ford and Isuzu claimed 10.9% and 7.5%, respectively, of the number of light commercial vehicles sold thus far in 2020. Mercedes leads the medium commercial vehicle segment with 29.1% of sales year-to-date. Scania was number one in the heavy and extra-heavy commercial vehicle segment with 24.3% of the market share year-to-date.

The Bottom Line

The new vehicle sales figures show how badly economic activity has been hampered since the lockdowns were imposed. New vehicle sales are down considerably when compared to 2019, which by itself was a bad year for vehicle sales. We expect the current depressed trend in new vehicle sales to remain depressed for the medium term as there are currently very few catalysts for economic growth. It is unlikely that many businesses and consumers will be in a financial position to purchase new vehicles for the rest of the year.