Sluggish growth in credit extended to private sector persists
Private sector credit extension growth moderated in November 2021, with growth logged at 1.7% down from 2.9% recorded in October, according to the Bank of Namibia’s latest reports.
The decline is attributed to lower demand for credit by both households and businesses, particularly in the short-term lending space.
Growth in credit extended to businesses slowed to 0.6% at the end of November 2021, relative to a growth of 3% a month earlier. The decline was mainly reflected in overdraft repayments by corporates in the commercial retail space, and manufacturing sectors and lower demand for term loans during the period under review.
Further, growth in credit extended to households slowed further to 2.5% at the end of November 2021, relative to 2.8% a month earlier, reflected by a decline in instalment and leasing sales and overdraft credit during the period under review.
In terms of credit by type, overdraft credit recorded a contraction of 6.5% at the end of November 2021 relative to a growth of 1.9% in the preceding month, driven by lower demand from households and repayments by corporates specifically those in the commercial retail space and manufacturing sectors during the reviewed period.
Mortgage credit rose slightly to 4% at the end of November 2021 relative to 3.9% at the end of October 2021, reflected by higher demand from the household sector and the sustained demand by the corporate sector during the period under review.
Instalment sales and leasing credit on the other hand registered a growth of 2.5%, relative to a growth of 2.1% in the preceding month, driven by an increase in demand from the corporate sector, given the low-interest-rate environment and the adjustments to the credit agreement act.
Research Analyst at PSG Namibia, Shelly Louw notes that the continued lacklustre growth in monetary and credit aggregates in the year until November 2021 is a clear sign that economic growth was feeble in 2021.
“Although the economy logged a second straight increase on an annual basis in the third quarter of 2021, following five successive quarters of negative annual growth there is a risk that real GDP will record a contraction in 2021.
However, Louw added, some grassroots of optimism for the near term outlook can be found as there tends to be a seasonal spike in agricultural output figures in fourth-quarter economic indicators in the tourism sector were positive ahead of tighter travel restrictions related to the Omicron variant in late November and there are early indications that mining production has maintained upward momentum.