Credit growth drops to record low as households remain under pressure
The overall Private Sector Credit Extension (PSCE) growth continues to deteriorate due to weak economic growth, job losses, fiscal tightening, stricter lending criteria and relatively high inflation according to wealth management firm, PSG Namibia.
Headline private sector credit increased by only 6.2% in August down from 6.9% in July. As a comparison, the long-term average for total PSCE is 13.4% indicating how severe the demand for credit has contracted.
According to statistics from the Bank of Namibia, the total credit extended to the corporate sector increased by 6% year on year (y-o-y) in August, up from a 5% y-o-y increase in the preceding month. In contrast, growth in credit extended to households slowed to 6.4% y-o-y in August from 8.3% y-o-y in July.
The central bank added that the slow growth in total credit extended to the household sector is reflected in all credit categories, except for other loans and advances, which rose during the period under review.
Meanwhile, the growth in total mortgage credit, which accounts for more than 50% of total PSCE, also slowed to 7.7% y-o-y in August from 8.3% y-o-y in the preceding month.
“Despite an uptick in corporate credit demand in August, growth in credit extended to businesses remained well below rates witnessed in recent years. Credit demand should improve somewhat during the rest of 2017 as we expect a modest economic recovery from the current recession on the back of strong output in the mining and agricultural sectors and a continued moderation in consumer inflation led by lower food prices,” PSG Namibia stated.