Tourism sector bouncing back

The tourism sector, which was hit hard by Covid-19, is showing signs of recovery after car rental agencies in the sector in July bought 141 new vehicles due to demand.

This is an increase compared to the 54 vehicles purchased in June.

According to the credit sector extension report by Simonis Storm Securities, the recovery is evident in car sales exceeding pre-pandemic levels, higher passenger arrivals and increased occupancy rates in hospitality establishments.

“The tourism sector, one of the hardest hit by Covid-19, is now showing substantial signs of recovery, not only in the automotive industry but also in increased passenger arrivals and higher occupancy rates at hospitality establishments,” says Simonis economic researcher Hallelujah Ndimulunde.

According to the Bank of Namibia, this growth has been primarily driven by the car rental industry, which has benefited significantly from the rebound in tourism activity.

Despite a rebound in the tourism sector, Namibia’s private sector credit extension has exhibited signs of weakness in July 2024.

According to the report, the overall credit extension grew at a pace of 1,8% for the year, a decline from the 2,6% y/y growth recorded a year ago.

“While this is the third-highest growth rate this year, the year-to-date average of 2,0% is the weakest in two decades,” says Ndimulunde.

Credit extended to businesses saw a slight increase to 0,8% in July 2024, up from 0,5% in June.

However, this was still an improvement from the negative growth of -1,2% recorded at the same time last year.

“While there was some recovery in other loans and advances, overdrafts worsened significantly. This indicates a focus on debt repayment by corporates,” says Ndimulunde.

Loans to households, which is the largest contributor, grew by 2,5%, however, this was a decline from previous months and below the 5,5% growth recorded in July 2023.

“The decline in other loans and advances could indicate a shift in borrowing preferences due to rising interest rates or a preference for more secure credit,” says Ndimulunde.