Growth in credit extended to private sector stumbles along
The continued lacklustre growth in monetary and credit aggregates for the year to October is a clear sign of feeble economic growth in 2021, according to PSG Namibia Research Analyst, Shelly Louw.
Louw cited the unchanged private sector credit extension (PSCE) growth in October of 2.9%, identical to the rate in September.
In its latest PSCE report, the Bank of Namibia noted that growth in credit extended to businesses rose to 3% in October from 1.8% in September, mainly due to the higher demand for mortgage credit, overdraft credit, and installment and leasing sales by corporates in the retail, agricultural and mining industries.
This is while the growth in credit extended to households slowed to 2.8% in October from 3.7% in the previous month, reflected by a decline in mortgage and overdraft credit.
Looking at money aggregates, broad money supply (M2) rose by 1% in October compared to a contraction of 2.2% in September. According to the central bank, the increase in M2 stemmed mainly from higher claims on the ‘other’ category in the form of loans extended to businesses.
“While the economy technically exited a recession in the second quarter of 2021 following five successive quarters of negative annual growth, there is a moderate risk that real GDP will record a contraction in 2021, given that the economy shrunk by 2.7% in the first half of 2021,” Louw said.
She added that the planned expansions of mineral production, such as gold, diamonds, and tin, are expected to boost economic growth to almost 4% next year, but prolonged travel bans due to the Omicron corona virus variant could scupper these plans.
