Private Sector Borrows N$609 Million in June

CREDIT extended to the private sector increased by N$609,4 million, or 1%, in June to N$63,7 billion, latest figures by IJG Securities have revealed.

On an annual basis, Private Sector Credit Extension (PSCE) growth eased to 15,4% year on year, compared to 16% year on year the preceding month, with total credit outstanding now N$8,5 billion more than a year ago.

The growth rate recorded in June was underpinned by expansion in both the corporate and individual segments of the market.The split between business and private credit in total debt outstanding is 39,1% to 60,5%.

“All in all, PSCE continues to play out as we projected with a slowdown in corporate credit dragging overall growth lower while offset be a continuing uptick in household credit growth,” IJG said in a report.

Credit extension to households expanded by 0,7% on a monthly basis and 13,7% on an annual basis in June, a slightly faster rate of growth than was seen in the preceding month.

The report said the growth in credit extension to households can be largely ascribed to prolonged and historically low interest rates in Namibia, allowing for the relatively cheap uptake of credit by interest sensitive households.

Growth was recorded for most of the sub categories in household credit on a month on month basis, with the main categories driving growth being installment credit, which expanded by 2,2%, and overdrafts, which went up 1,7%, during the month. Over the past year, the majority of the credit extended to households was in the form of mortgage loans (N$2,6 billion out of a total of N$4,6 billion), which expanded by 12,6% from last year, largely reflecting g house price increases in Windhoek and at the coast. Other claims decreased by N$83,5million in June to a N$110,5 million increase for the year.

Credit extension to corporates grew by 17,8% year on year in June, down from 18,5% in May.

Foreign reserves increased 2,5% month on month to N$15,9 billion at the end of June following a decrease of 11,1% in May.This increase is a result of increases in interest rates and tax payments in June, and a SACU receipt on 1 July.

“Looking forward, we expect credit growth to remain g through 2014 despite the 25 basis points rate hike in June and further expectations of interest rate increases, as real income growth is expected to remain elevated given the buoyant economic conditions within the country, which will reinforce demand for credit from households. A slowdown in corporate credit is however expected to lead a broad based slow down in PSCE,” the report said.

Source : The Namibian