Category Archives: Economic Research

Economic Research

New Vehicle Sales – June 2020

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

767 New vehicles were sold in June, an increase of 62.8% m/m from the 471 new vehicles sold in May. However, this is a decrease of 21.5% y/y from the 977 new vehicles sold in June 2019. Year-to-date 3,517 vehicles have been sold, of which 1,530 were passenger vehicles, 1,766 were light commercial vehicles, and 221 were medium and heavy commercial vehicles. On a rolling 12-month basis, a total of 8,595 new vehicles were sold as at June 2020, representing a contraction of 24.7% from the 11,412 sold over the comparable period a year ago.

345 New passenger vehicles were sold during June, increasing by 56.8% m/m, although this increase is from a low base. On a year-on-year basis, June’s new passenger vehicle sales were 8.7% lower than the 378 vehicles sold a year ago. Year-to-date passenger vehicle sales rose to 1,530 units, down 38.1% when compared to the number sold in the first half of last year. Twelve-month cumulative passenger vehicle sales fell 0.9% m/m and 27.3% y/y. Passenger vehicles have made up 43.5% of the total number of new vehicles sold in the first six months of 2020, compared to 46.4% in the same period last year.

A total of 422 new commercial vehicles were sold in June, representing a 68.1% m/m increase, but a 29.5% y/y contraction. The monthly increase is again from a low base. Of the 422 commercial vehicles sold in June, 386 were classified as light commercial vehicles, 12 as medium commercial vehicles and 24 as heavy or extra heavy commercial vehicles. On a twelve-month cumulative basis, light commercial vehicle sales dropped 24.6% y/y, while medium commercial vehicle sales rose 6.1% y/y, and heavy commercial vehicle sales fell by 13.7% y/y. While medium- and heavy commercial vehicles continue to record growth on a twelve-month cumulative basis, the light segment of the market continues to see lower volumes sold than in 2019.

Volkswagen narrowly leads the passenger vehicle sales segment with 30.4% of the segment sales year-to-date. Toyota retained second place with 29.5% of the market share as at the end of June. They were followed by Kia and Hyundai with 6.5% and 5.6% of the market respectively, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota, with a strong market share of 56.4% year-to-date commands the light commercial vehicle sales segment. Nissan remains in the second position in the segment with 13.7% of the market, while Ford makes up third place with 10.3% of the year-to-date sales. Mercedes leads the medium commercial vehicle segment with 31.7% of sales year-to-date and remains number one in the heavy and extra-heavy commercial vehicle segment with 22.3% of the market share year-to-date.

The Bottom Line

June saw the number of new vehicles sales increasing quite substantially on a monthly basis. However, as pointed out earlier in this report, this increase is from a relatively low base as vehicle sales are merely recovering after very low activity during lockdown. In the first half of this year, new vehicle sales are down 33.9% y/y compared to the same period in 2019. We expect new vehicle sales to remain under pressure and do not foresee any substantial increases in the number sold for at least the rest of the year, as economic conditions are expected to remain weak.

PSCE – May 2020

By | | ,
Comments Off on PSCE – May 2020

Overall

Total credit extended to the private sector (PSCE) declined by N$129.9 million or 0.13% m/m in May, bringing the cumulative credit outstanding to N$102.29 billion. On a year-on-year basis, private sector credit increased by 1.8% in May, compared to 3.4% in April. This is the lowest annual growth rate on our records dating back to 2002. On a rolling 12-month basis, N$1.83 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$2.92 billion, while corporates decreased their borrowings by N$748.1 million, and the non-resident private sector paid back N$342.3 million of their borrowings.

Credit Extension to Individuals

Growth in credit extended to individuals slowed to 5.2% y/y in May from the 5.7% y/y growth recorded in April.  On a monthly basis household credit increased by 0.1%. Mortgage loans extended to individuals increased by 0.3% m/m and 5.0% y/y. Installment credit, often used to finance vehicle purchases contracted by 0.7% m/m and 7.0% y/y. Overdraft facilities extended to individuals have increased by 0.2% m/m and 10.0% y/y. Other loans and advances (or OLA, which is made up of credit card debt, personal and term loans) fell by 0.1% m/m, but grew by 20.0% y/y in May.

Credit Extension to Corporates

Credit extended to corporates contracted by 0.3% m/m and 1.7% y/y in May. This is the first contraction in corporate credit extension on an annual basis since December 2005. The Bank of Namibia (BoN) attributes this contraction to repayments made by corporates as some businesses restructured their credit exposure, coupled with write-offs during the period. This was expected as economic activity remained muted during the month as a result of the lockdown. Overdraft facilities extended to corporates fell by 1.2% m/m and 8.1% y/y. The persistent contraction in installment credit continued in May, declining by 1.4% m/m and 9.1% y/y. Mortgage loans extended to corporates grew by 0.4% m/m, but contracted 3.7% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved during May, increasing by N$572.4 million to reach an average N$3.90 billion. The balance of repo’s outstanding fell from N$147.4 million at the start of May to zero at the end of the month. The BoN ascribed the improved liquidity position to higher government expenditure in the form of the emergency income grant, the settlement of outstanding invoices for services rendered and the acceleration of VAT refunds.

Reserves and Money Supply

Broad money supply rose by N$4.50 billion or 11.4% y/y in May, as per the BoN’s latest monetary statistics release. Foreign reserve balances declined by 5.1% m/m to N$33.7 billion in May. According to the BoN, the decline is due to government payments as well as revaluation effects after the Namibian dollar strengthened against the US Dollar during the period.

Outlook

Private sector credit extension remained depresses at the end of May, increasing by only 1.8%, with annualised growth slowing for a fourth consecutive month. Cumulative 12-month private sector credit issuance is down 75.5% from the N$7.46 billion figure as at May 2019. Rolling 12-month issuance of N$1.83 billion is now at levels last seen in 2005.

Despite Namibian interest rates now being at their lowest levels yet, we do not expect either consumers or corporates to rush to commercial banks to take up large sums of debt any time soon. Economic activity remains very low and a lack of demand means that growth opportunities for businesses remain extremely slim. Businesses that do make use of credit will likely mostly do so to keep their doors open, instead of investing in capital projects. Banks will furthermore remain cautious in extending loans as their risk appetite will be low given the current economic environment.

NCPI – May 2020

By | | ,
Comments Off on NCPI – May 2020

The Namibian annual inflation rate ticked up slightly to 2.1% in May, following the 1.6% y/y increase in prices recorded in April. Prices in the overall NCPI basket increased by 0.4% m/m. Namibian inflation thus remained at historically low levels in May. On a year-on-year basis, overall prices in eight of the twelve basket categories rose at a quicker rate in May than in April, with two categories recording slower rates of inflation and two categories recording increases consistent with the prior month. Prices for goods increased by 2.3% y/y while prices for services rose by 1.7% y/y.

The food & non-alcoholic beverages category was the largest contributor to annual inflation in May, accounting for 0.83 percentage points of the total 2.1% annual inflation rate. The category recorded price increases of 0.1% m/m and 4.7% 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 fruits, vegetables and coffee, tea and cocoa.

The miscellaneous goods & services basket item was the second largest contributor to annual inflation, accounting for 0.32 percentage points of the total 2.1% annual inflation figure. The fact that the sixth largest basket item was one of the largest contributors to the annual inflation figure in May illustrates how low inflationary pressure is at the moment. The prices of miscellaneous goods & services remained steady on a month-on-month basis, but rose 6.1% y/y. The only subcategory which showed an increase on a month-on-month basis was personal effects, which increased by 0.7% m/m. Prices in all other subcategories remained steady during the month, except for the personal care subcategory, which recorded price decreases of 0.4% m/m.

The education basket recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6% y/y. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3%. 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 0.3% in the northern zone, 0.4% in the central zone, and 0.2% in the mixed eastern, southern and western zone. On an annual basis the northern region recorded the highest inflation rate at 2.3% y/y in May, while both the central zone 2 and mixed zone 3 recording inflation rates of 1.9% y/y. 

Despite a slight uptick in the inflation rate in May to 2.1% y/y, inflationary pressure remains extremely subdued. Despite the lockdown restrictions being lifted for most industries and regions, many businesses and consumers remain under severe financial pressure and are simply not able to afford higher prices for goods and services.

The low inflationary pressure does at least provide the Bank of Namibia (BoN) some leeway to follow the SARB by cutting interest rates at its June MPC meeting in an attempt to resuscitate economic growth. While this should bring some further relief to heavily indebted businesses and consumers, it is unlikely that commercial banks will be spurred on to grow their loan books as risks remain. Monetary policy alone will thus not be enough to drive meaningful economic growth, and as a result inflation is expected to remain low in the short- to medium term. IJG’s inflation model forecasts an average inflation rate of 1.9% y/y in 2020 and 3.7% y/y in 2021.