Private sector credit extension slows to 2%
Private sector credit extension (PSCE) growth moderated to a five-month low in August 2021, slowing to 2% in August from 3% in July, according to the Bank of Namibia.
Growth in credit extended to businesses declined to 1.2% in August from 2% in July. The central bank ascribes the decrease to lower demand and repayments in other loans advances and overdraft credit by corporates.
Meanwhile, the growth in credit extended to households picked up to 4.4% in August from 3.7% in the previous month, mainly reflected in the loans advances and instalment leasing sales credit categories.
Cumulative credit extended to the private sector over the last 12-months amounted to N$1.91 billion, down 17% from the N$2.23 billion issued by this time last year. Individuals have taken up the majority of this cumulative issuance.
IJG Research said even if interest rates remain steady for the remainder of 2021, as expected, this is unlikely to meaningfully increase the growth rate of PSCE.
“Despite growth in the economy in the second quarter of 2021, consumers are likely to remain cautious and prioritise saving overconsumption. The data bears this out as year-on-year increases in credit extensions to individuals in 2021 are similar to those seen in 2020. Meaningful PSCE growth is therefore likely to return only once macroeconomic conditions improve meaningfully and both consumers and businesses can spend more freely,” IJG noted.
