Weak credit uptake is concerning-SS
The deepening decline in real private sector credit extension in September is concerning, indicating a real reduction in borrowing, Simonis Storm (SS) said.The annual growth in private sector credit extension (PSCE) slowed to 1.6%, year-on-year in September 2023, relative to the 2.3% at the end of August 2023, according to the Bank of Namibia (BoN).
The sluggish growth in credit uptake mainly emanated from a lower demand coupled with net repayments of credit by businesses, specifically corporates in the services, wholesale and retail trade, commercial real estate, mining, manufacturing and fishing sectors, the central bank pointed out.
“Deleveraging by businesses and households, prioritizing debt repayment over new debt for investment or consumption, can dampen aggregate demand and tighten credit availability. Factors like high interest rates, rising inflation, and economic uncertainty likely contribute to this negative trend,” SS pointed out.
At the fifth monetary announcement for the year, BoN decided to keep the repo rate unchanged at 7.75% for the second consecutive time. Year to date, the central bank hiked the repo rate by 100 basis points. The last monetary policy announcement for the year by BoN is expected to take place on 6 December.
Meanwhile, the South African Reserve Bank’s (SARB’s) sixth and last monetary policy announcement for the year is expected to take place on 23 November. At the previous announcement, SARB decided to keep the repo rate unchanged at 8.25% for the second consecutive time.
Inflation in Namibia and South Africa stood at 5.4% in September, according to the Namibia Statistics Agency (NSA) and Stats SA.
The South African Reserve Bank monetary policy committee prefers to anchor inflation expectations close to the 4.5% midpoint of its 3%-6% target range, Fin24 reported. BoN projects inflation to average 5.9% in 2023.
“We foresee the South African Reserve Bank maintaining their monetary policy rates unchanged during the upcoming meeting. Therefore, BoN is likely to follow suit and keep rates unchanged again at their meeting in December. Our projection suggests that interest rates will remain at elevated levels, with the possibility of rate cuts not materializing until the second half of 2024,” Simonis Storm said.