Analysis
Credit extended to the private sector slightly increased to N$ 118.186 million for January 2023 from N$ 118.179 million that was recorded in December 2022. This translated into an increase of N$ 21 million. The slight monthly improvement was driven by an increase in the demand for loans and advances taken by households. According to the Bank of Namibia, the low demand and net repayments by corporates in the services, wholesale, and retail trade sectors negatively influenced credit appetite during the period under review. (Figure 1).
Private Sector Credit Extension (PSCE) year-on-year growth remained steady at 2.6 percent at the end of January 2023, unchanged from the level it was in January 2022. On a monthly basis, credit extended to the private sector declined by 2.4 percent in relation to December 2022. The decline was attributed to low demand for business overdrafts, which contracted by 9.0 percent. However, the demand for loans and advances by the households category recorded a growth of 17.3 percent during the month under review. (Figures 2 and 3).
Figure 1: Annual % ∆ growth rates on Total Credit Extended to the Private Sector vs. Repo Rate & Interest Rate, (January 2021- January 2023)
Figure 2: The % ∆ in Credit Extended to Businesses per category Year on Year (January 2022-January 2023)
Figure 3: The % ∆ in Credit Extended to Individuals per category Year on Year, (January 2022-January 2023)
Outlook
Although interest rates and inflation are on the rise, we expect the demand for credit to remain strong throughout 2023. The positive outlook for economic growth, particularly in the diamond mining industry, may result in an increased need for credit among businesses operating in this sector. In the short-to-medium term, we anticipate a higher acceptance rate for loan applications. On the other hand, the escalating costs of fuel and food, combined with the projected increase in interest rates, will continue to put a strain on household finances. This could lead to more households seeking loans to cope with the high cost of living.