Credit growth continues to slow as economy contracts
Private sector credit extension (PSCE) growth moderated in November, driven by weaker demand for credit by both the corporate and household sectors, according to the Bank of Namibia’s recently released credit and money growth figures.
According to the central bank, PSCE growth slowed to 4.5% year-on year (y-o-y) in November from 4.9% y-o-y in October, while total credit extended to the corporate sector grew by a paltry 1.3% y-o-y in November, down from 2.2% y-o-y in the preceding month.
Furthermore, growth in credit extended to households moderated to 7.0% y-o-y in November from 7.4% y-o-y in October. Additionally, the growth in total mortgage credit, which accounts for more than 50% of total PSCE, also slowed to 8.1% y-o-y in November from 8.2% y-o-y in the preceding month.
According to analysts from PSG Konsult Namibia, PSCE growth remains under pressure due to weak domestic demand, job losses, fiscal tightening and stricter lending criteria, however, the analysts see growth moving forward.
“We expect credit demand should improve somewhat during 2018 thanks to a modest economic recovery from the current recession on the back of stronger output in the mining and agricultural sectors, lower consumer inflation and improved government liquidity thanks to an African Development Bank (AfDB) loan,” the firm stated.
As far as money growth is concerned, the broad money supply (M2) increased by 9.2% y-o-y in November, higher than the increase of 8.8% y-o-y in the preceding month.
“Annual increase in the growth of M2 was partly driven by the improved growth in domestic claims coupled with a rise in the growth in transferable deposits and demand for notes and coins during the period under review,” the central bank said.