Economic agents reluctant to take up credit
Interest rates expected to remain unchanged
Private sector credit extension grew by 1.8% year-on-year in October, a decline when compared to the 3.5% growth recorded in the corresponding month of 2022.
Corporates are more reluctant to borrow under the current economic conditions characterised by relatively high interest rate environment and low consumer confidence. Credit extension to individuals is stronger, by comparison, but continues to trend well below inflation, according to IJG Securities. “With interest to be cut before mid-2024, we remain of the view that we do not anticipate a significant improvement in overall private sector credit extension (PSCE) growth in the short term,” IJG added.
Year to date, the Bank of Namibia (BoN) hiked the repo rate by 100 basis points to 7.75%. At the previous two monetary policy announcements, BoN decided to keep the repo rate unchanged.
The sixth and last monetary policy announcement for the year by the central bank is expected to take place tomorrow.
“Ahead of this meeting, it is anticipated that the repo rate will be held steady at 7.75%, with the prime rate also remaining unchanged at 11.50%,” Simonis Storm said.
This expectation is in line with the decision of the South African Reserve Bank (SARB) to keep the repo rate at 8.25% during its latest meeting on November 23, 2023.
While maintaining the current rate may not significantly alleviate the interest rate burden for businesses, households, and consumer disposable income, it does avoid further financial tightening that a rate increase would entail. This stability in interest rates provides a measure of relief and steadiness in the financial landscape, Simonis Storm added.
All in all, private sector credit extension in Namibia modestly increased to 1.8% year-on-year in October, a slight improvement from the 1.6% year-on-year observed in September 2023.
However, this represents a decline when compared to the 3.5% year-on-year growth in October [email protected]