Analysis
Credit extended to the private sector (individuals and businesses) increased to N$ 110,214 million from N$ 109,737 million recorded in August 2022. This translated into a slight monthly increase of 0.4%. The slight monthly increment continues to be driven mainly by the demand for other loans and advances and overdrafts by households. The demand for credit by businesses continues to be subdued due to the lower demand and repayments in other loans advances and overdrafts. See figure 1 below.
On an annual basis, total credit extended to the private sector increased by 5.7% in September up from 2.7% recorded in September 2021. The annual growth rate was mainly driven by other loans and advances for households by 1.3% and 1.5%, respectively. This is an indication that household confidence is returning albeit at a slow pace. According to the Bank of Namibia, the low demand for credit by the corporate sector offsets the growth in the household sector during the period under review. See Figures 2 & 3.
Figure 1: Annual % growth rates on Total Credit Extended to the Private Sector vs. Repo Rate & Interest Rate, (January 2020- September 2022)
Figure 2: Annual % changes for Credit Extended to Businesses per category, (September 2021-September 2022)
Figure 3: Annual % changes for Credit Extended to Individuals per category, (September 2021-September 2022)
Outlook
Despite growth in the economy in the second quarter of 2022. The current macroeconomic conditions pose a risk to the demand for credit and overall significant growth in the PSCE. Businesses and consumers are likely to remain cautious in making credit decisions in the short to medium term. The PSCE growth is therefore likely to return to normalcy only once macroeconomic conditions improve meaningfully.