Overall
Private sector credit (PSCE) rose by N$104.5 million or 0.1% m/m in October, bringing the cumulative credit outstanding to N$109.6 billion after normalising for interbank swaps accounted in non-resident private sector claims. Year-on-year, private sector credit grew by 3.0% in October, marginally slower than the 3.6% y/y growth recorded in September. On a 12-month cumulative basis, N$3.21 billion worth of credit was extended to the private sector. Of the cumulative issuance, corporates borrowed N$1.37 billion and individuals took up N$2.29 billion.
Credit Extension to Individuals
Credit extended to individuals increased by 0.8% m/m and 3.7% y/y in October. Annual growth in all of the credit lines to individuals picked up in October. Mortgage loans to individuals posted growth of 0.4% m/m and 2.6% y/y. Other loans and advances (consisting of credit card, personal, and term loans) grew by 3.0% m/m and 10.3% y/y, and instalment credit rose by 0.9% m/m and 2.6% y/y. Overdraft facilities to individuals contracted by 1.3% m/m and 0.3% y/y.
Credit Extension to Corporates
Credit extended to corporates contracted by 0.9% m/m but rose by 3.1% y/y in October. The Bank of Namibia (BoN) ascribes the decline to lower credit demand and deleveraging by corporates in the construction and services sectors. All of the credit lines to corporates, bar other loans and advances, saw a deceleration in annual growth in October. Mortgage loans grew by 0.1% m/m but declined 3.3% y/y. Installment credit posted growth of 1.7% m/m and 14.6% y/y. Overdrafts declined by 2.3% m/m and 6.2% y/y. Other loans and advances to corporates contracted by 1.5% m/m but rose 13.2% y/y.
Banking Sector Liquidity
The overall liquidity position of the commercial banks improved in October, rising by N$616.7 million to an average of N$3.33 billion before ending the month at N$3.4 billion. The BoN attributed the improved liquidity position to inflows from government bonds, specifically the redemption of GI22 and interest payments on other bonds.
Money Supply and Reserves
Broad money supply (M2) contracted by N$1.85 billion or 1.8% y/y to N$126.4 billion. According to the BoN, the contraction came on the back of a decline in net foreign assets of the depository corporations as a result of rising government foreign payments, combined with commercial bank outflows for import payments and lower growth in domestic claims. Foreign reserve balances fell by 6.7% m/m or N$3.20 billion to N$44.8 billion in October. The BoN ascribed the decline largely to government payments and commercial bank outflows during the period under review.
Outlook
Annual PSCE growth slowed for the second consecutive month in October. The BoN once again attributed the lower growth in PSCE to lower credit demand and repayments by the corporate sector, specifically corporates operating in the construction and services sectors.
The BoN’s MPC hiked interest rates by 50 basis points in November, bringing the prime lending rate to 10.5% and just 25bps below the highest lending rate of the past decade. The rapidly rising borrowing costs, coupled with the muted economic activity means that PSCE growth will possibly remain subdued in the short-term. On the supply side, we see little change from the current status quo over the near term.