Interest Hikes Expected in Fourth Quarter

TOTAL Namibian debt (comprising domestic and foreign government, corporate and household debt) grew by 1,54% in April to N$92,50 billion.

This represents an annualised growth rate of 14, 41%. Private sector credit extension growth (PSCE) stands at 15,88% on an annual basis.

The figures are based on the Bank of Namibia’s selected monthly statistics for April.

Analysing the figures, Simonis Storm Securities (SSS) said in a report yesterday that the growth in PSCE is mainly attributed to both household and corporate debt which grew by 15, 81% and 15, 99% respectively.

“Using our estimates for GDP growth in 2014, total debt to GDP ratio stands at 73,63% and public debt to GDP stands at 24,30%. Corporate debt growth has edged higher from March’s numbers of 13,69% year on year to 15,91%,” SSS said.

The report said the weak economic conditions in South Africa suggest that further monetary accommodative easing should be maintained. The strikes in South Africa, coupled with a weaker consumption base, lead to a first quarter economic contraction, SSS said.

“This suggests that the South African reserve bank may have to hold off any interest rate hike in the medium term. On the Namibian front, we do not anticipate an interest rate hike consideration until the fourth quarter of the year,” the report said.

Foreign reserves edged higher to N$17, 48 billion from N$14, 59 billion on the back of Southern African Customs Union (SACU) receipts.

Total government debt has grown to N$30,53 billion in April, an 11, 54% growth on a year-to-year basis.

SSS noted that the government has continued to reduce the proportion of its domestic short-term treasury bills as longer term bonds remain favourable. Estimates show that foreign debt stock has grown by 10,04% on an annual basis.

In terms of household debt, SSS said the year-on-year growth of 15, 69% shows that there was a positive reaction from consumers concerning the central bank’s choice to maintain the interest rate environment. Mortgages grew by 13, 26% on a yearly basis while the other loans and aances category grew by 25,03%.

“Growth in this sector is expected to continue unabated until such time when interest rates increase,” said the report.

Source : The Namibian