Credit extended to the private sector decreases by N$264 million in February
Credit extended to the private sector decreased by N$264 million or 0.25% in February, bringing the cumulative credit outstanding to N$103.8 billion, the Bank of Namibia reported.
According to the central bank, credit extended to individuals increased by 6.7% in February, growing at a slightly slower pace than the 7% increase recorded in January, while credit extension to corporates contracted by 1.2% after increasing by 7.3% in January.
The overall liquidity position of commercial banks improved somewhat during February, increasing by N$278.2 million to reach an average of N$325.9 million. Commercial banks continued to utilize the Bank of Namibia’s repo facility, as the overall liquidity position remained low. The balance of repo’s outstanding decreased from N$2.04 billion at the start of February to N$974.1 million at the end of the month.
As the above data precedes the economic impact of the Corona Virus pandemic, Analysts expect the pandemic to have a detrimental impact on private sector credit extension going forward.
“While the Bank of Namibia’s unexpected ‘early’ repo rate cut in March (from 6.25% to 5.25%) is likely to provide relief to heavily indebted consumers, we don’t anticipate that the more accommodative monetary policy will be effective in stimulating economic activity to the extent that it eliminates the impact of the external shock to the economy,” IJG Research analysis indicates.
Given the 21-day lockdown of the two most economically significant regions announced by the Namibian government, the analysts expect both consumers and businesses to increase their uptake of short-term debt going forward as a means of making ends meet, as most economic activity (and subsequently income) grinds to a halt while expenditure will still need to be covered.