Repo rate on par with South Africa at 3.75%

PHILLEPUS UUSIKU

IJG Securities expect the Bank of Namibia (BoN) to increase the repo rate at the next monetary policy announcement. The repo in Namibia and South Africa currently stands at 3.75%.

The South African Reserve Bank’s (SARB) monetary policy committee (MPC) raised the South African repo rate for the first time in almost three years during its last meeting on 18 November.

The rate hike came off the back of elevated inflation that threatened to rise beyond 6.0% year-on-year, the upper-bound of the SARB’s inflation target. While the rate hike may ease inflation concerns it will not stimulate growth in the private sector credit markets, IJG said.

According to the Bank of Namibia (BoN) money and banking statistics, credit extended to the private sector remained unchanged at 2.7% year-on-year in October 2021. Corporate credit growth was mainly driven by an increase in demand for mortgage loans, overdrafts and instalment credit by businesses in the retail, agriculture and mining sectors. Household credit growth was weighed down by lower demand for mortgage loans and overdrafts.

Household annual credit growth increased by 2.8% year-on-year in October 2021 compared to 3.7% year-on-year in September 2021. The biggest contributors were mortgage loans, increasing by 3.2% year-on-year in October 2021, compared to 4.3% year-on-year in the prior month. Instalment and leasing credit slowed to 0.6% year-on-year in October 2021 compared to 1.3% in the prior month, BoN said.

Businesses

Corporate credit growth lifted to 3.0% year-on-year in October 2021 compared to 1.8% year-on-year in September 2021.

Corporate borrowing was mainly attributed to mortgage loans, which increased by 6.1% year-on-year in October 2021 compared to 2.8% year-on-year in September 2021 and instalment credit which increased by 5.0% year-on-year in October 2021, compared to 0.2% year-on-year in September 2021, BoN added.

According to Simonis Storm (SS), year to date, annual growth in credit extension averaged 2.5%. “We expect credit extension to average 2.6% for 2021 owing to a slight increase expected in instalment and overdraft credit in the upcoming festive season.”

“While Bank of Namibia forecasts annual growth in credit extension of 6% in 2022, we expect annual credit extension growth in the range of 1.7% to 2.6% for 2022,” SS said.

IJG expect weak growth is to continue in the short to medium-term and Simonis Storm expect annual credit extension growth in the range of 1.7% to 2.6% for [email protected]