Decline in new credit growth bottoming out
The severe decline in the rate of new credit growth seems to have bottomed out at the end of 2017, which is in line with analytical expectations of PSG Konsult Namibia, in that GDP growth recovered during the 4th quarter of 2017 and that demand for credit should improve moderately in 2018.
Private sector credit extension (PSCE) growth ticked higher for the second consecutive month in January 2018, driven by stronger demand for credit by both the corporate and household sectors, according to the Bank of Namibia’s recently released credit and money growth figures.
PSG Konsult, however noted that credit extension growth remains under pressure due to weak domestic demand, job losses, fiscal tightening and stricter lending criteria.
“Nevertheless, we expect 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,” PSG said.
PSCE rose by 5.8% year on year (y-o-y) in January compared to growth of 5.2% y-o-y in December. According to the central bank, the higher growth in PSCE was also reflected in the increased demand for short-term credit facilities.
Meanwhile, total credit extended to the corporate sector grew by 3.2% y-o-y in January, up from 2.7% y-o-y in the preceding month.