Namibians borrow less in third quarter

The total amount of credit extended to the private sector in the third quarter of 2023 was N$357,1 billion.

This is 0,09% higher than credit extended in the second quarter of this year, translating to 4% more credit given to the private sector than in the third quarter of 2022.

According to Simonis Storm Securities economic analyst Angelique Bock, when compared to previous quarters in 2023, growth in credit for the third quarter is, however, exceptionally low.

Bock says credit extended to the private sector slackened to the lowest rate this quarter, increasing by a meagre 1,6% year on year (y/y) in September, compared to 2,6% y/y and 2,2% y/y in July and August 2023.

This brings the average credit extension in the third quarter of 2023 to 2,1% y/y, lower than the 4,2% average in the same quarter last year.

She says according to the Bank of Namibia (BoN), the low growth is due to low credit appetite from the private sector together with higher net repayments.

Despite these low credit growth rates, the economy still remains resilient.

Nominal gross domestic product (GDP) in the first half of 2023 reached N$115,9 billion, and real GDP N$76,9 billion – the highest it has ever been, the analyst says.

“Nominal GDP grew by 14,1% y/y in the second quarter of 2023, and when adjusting for inflation, it grew by 3,7% y/y, driven by higher mining activity.

However, companies in the mining sectors are net repayers of loans.

“Going forward, there are concerns that slowed private sector credit extension growth figures would affect economic growth, but it could also be that local companies are sourcing their funds from investors and not commercial banks,” Bock says.

Having dropped 2,1% y/y, businesses are net repayers of their debt for the sixth consecutive month in September 2023, while households rose 4,3% y/y, and foreigners went up 1,6% y/y, credit growth slowed, but borrowers remained in the same month.

According to the BoN, the sluggish growth can primarily be attributed to a subdued demand environment, associated with net credit repayments executed by businesses within the services, wholesale and retail trade, commercial property, mining, manufacturing, and fishing sectors.

Bock says mortgage credit maintained a steady 1,2% y/y growth, supported by the household sector despite increased corporate repayments.

Household mortgages increased by 3,2% y/y, while business mortgages decreased by 4,9% y/y in September 2023.

In September 2023, overdraft credit growth contracted by 0,4% y/y – down from 0,3% y/y in August.

“This decline was driven by reduced demand and higher corporate repayments, particularly in the mining, manufacturing, and wholesale/retail sectors.

“Overdraft demand from households rising 3,0% y/y, slowed from its peak of 6,1% y/y in July, while businesses were down 1,2% y/y, and were net repayers of their overdrafts,” the analyst says.

Conversely, instalment sales and leasing credit increased to 11,6% y/y in September, driven by higher demand for new vehicles from both businesses and households, with strong support from the car-rental industry.

Indeed, businesses instalment and leasing credit, which rose by 20,0% y/y, has reached its highest annual growth rate, while households increased slightly at 6,4% y/y.

During the first quarter of 2023, microlender credit extension registered a substantial annual contraction of 10,3% y/y, exceeding the more gradual decline of 7,8% y/y witnessed in the fourth quarter of 2022.

Given modest growth figures observed within the commercial banking sector, an upswing in credit demand at microlenders is anticipated, driven by financial constraints and a more rigorous loan approval process by banks due to economic uncertainties.

– email: matthew@namibian.com.na

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