Credit extended to private sector remains subdued, decreases by N$337.6 million
Growth in credit extended to the private sector remains subdued, decreasing by N$337.6 million in March, causing monthly growth to revert into negative territory for the first time since September 2020, according to latest numbers by the Bank of Namibia.
This brings the cumulative credit outstanding to N$105.3 billion. The rolling 12-month private sector credit issuance is down 71.7% from the N$5.68 billion cumulative issuance as at the end of March 2020, with individuals taking up most (94.5%) of the credit extended over the past 12 months.
Credit extended to individuals increased by 2.57% in March while credit extension to corporates contracted for a second consecutive month, declining by 1.1%.
Research firm, IJG, reports that the low credit appetite reflects the lack of confidence in the Namibian economy, with businesses continuing to deliver their balance sheets and banks being more prudent with lending out money.
“We expect interest rates to remain at their current, historically low, levels. This should continue to provide over-indebted consumers and corporates with relief but is unlikely to drive private sector credit extension growth,” IJG noted.
The firm explained that the dull statistics in private sector credit extension reflects the nation’s poor recent economic performance of late, as it reflects both lower consumption spending as well as lower investments by corporates, which are two vital components of GDP.
“There are very few catalysts for economic growth at present, and as a result we do not expect to see a recovery in credit extension in the short term,” IJG added.