New credit to individuals supported PSCE growth in July
According to Klaus Schade, Research Associate at the Economic Association of Namibia, the overall growth in credit extension in July was driven by growth in credit extended to individuals, which increased by 0.9% compared to June 2018.
The Bank of Namibia in its latest Money and Banking Statistics published on Friday, 31 August, said overall growth in private sector credit extension (PSCE) moderated slightly at the end of July 2018 to 5.3% compared to 5.5% in June.
Schade explained that this is the strongest monthly growth so far this year for new credit to individuals, as there was a slight decline of 0.1% in June compared to May 2018. In contrast, credit extension to businesses in July dropped by 0.4% compared to June 2018.
He further explained that the slow growth compared to previous years of credit extension to the private sector reflects the subdued sentiments in particular in the business sector and indicates that the economy is still facing headwinds.
“This is particularly true for the construction sector that does not receive much of a boost from the private sector as the slow, month-on-month increase in mortgages suggests,” Schade said.
Schade added that the mortgages’ share of private sector credit extension has remained fairly stable over time even during the construction boom.
The economic association also added that mortgages accounted for 52.4% of credit extended, adding that while mortgages to individuals increased by 1% compared to June 2018, mortgages to businesses declined by 1.9% over the same period.