The Financial System Stability Committee (FSSC) has recommitted to maintaining a high level of vigilance and to carefully monitor risks as well as steer the course to address any emerging risks in the domestic financial system. The FSSC, which was established by and operates within the ambit of the Bank of Namibia, recently concluded that no specific stability and resilience policy recommendations and actions are deemed necessary in Namibia’s financial system.
The FSSC held a meeting last week Thursday, to assess the resilience of the Namibian financial system to potential risks emanating from both global and domestic fronts. Based on a thorough assessment of global and domestic macro-financial developments, the committee found the domestic financial system to be stable, sound, and resilient.
In a statement, it said that the FSSC conducted a thorough assessment of both global and domestic risks to financial stability, with a specific focus on potential vulnerabilities that may impact the domestic financial system.
Meanwhile, the FSSC determined that Namibia’s financial system remains sound and resilient amidst the moderation in global and domestic economic conditions.
“The financial system continued to function efficiently during the first half of 2024, and all statutory requirements were met, despite concerns about household indebtedness. The banking sector remained liquid, profitable, and well capitalised supported by growth in the banking sector’s balance sheets, mainly due to net loans and advances. The Non-Bank Financial Institutions (NBFIs) were financially sound and stable during the first half of 2024, attributable to developments in global financial markets, coupled with a stable demand for NBFI products on the back of moderating inflation and increased government spending,” the statement added.
Meanwhile, the Namibia Interbank Settlement System continued to maintain high system availability during the first half of 2024. In comparison with 2023, there has been a substantial decrease in the total value of fraud across all payment streams during the period under review. In this regard, the payment system and infrastructure remained safe and contributed efficiently to ensuring reliability in payment transactions, thus facilitating stability within the financial system. The assessment further concluded that the financial system in Namibia experienced no major disruptions or disorderly functioning of key financial services, despite prevailing risks.
The FSSC continued that risks to the Namibian financial system are expected to remain broadly contained with notable developments.
“The potential risks emanating from the FATF greylisting have somewhat improved, given the progress made by Namibia in addressing the findings of the FATF/ESAAMLG Mutual Evaluation recommendations and the FATF Action Plan to enhance Anti-Money Laundering and Combatting the Financing of Terrorism and Proliferation measures. Other key risks to the financial system include climate change and cybersecurity,” the Bank of Namibia stated.
Moreover, the global GDP growth rate is expected to decline slightly in 2024, following tighter monetary conditions. In its July 2024 World Economic Outlook (WEO), the International Monetary Fund (IMF) projected the global economy would grow by 3.2% in 2024, slightly lower than the 3.3% growth rate registered in 2023.
The central bank added: “The global economy remained resilient during the first half of 2024, despite challenges such as tight monetary conditions. Risks to the global economy include inflationary pressures from a lack of progress in reducing prices for services. Other global risks include trade and geopolitical tensions, as well as regional broadening of the ongoing military conflicts in various parts of the world.”
In terms of domestic economic activity, consistent growth was observed during the first half of 2024, fuelled by increased activity in all industries. The mining sector as well as livestock marketing, contributed positively to growth in the primary industry.
“A moderate two year-on-year decline in local electricity generation in the second quarter of 2024 hindered growth in the secondary industry, which was worsened by a decline in the diamond cutting and polishing activity. This was offset by a rise in construction, blister copper, and cement, as well as beer and soft drinks production, registering an increase in the overall output of the secondary industry. Growth in the tertiary industry was supported by the wholesale and retail trade, information and communication, transport and storage, and tourism sectors,” the Bank of Namibia added. The central bank expects GDP growth to slow to 3.1% in 2024, mainly due to drought, low diamond prices, and weak global demand. As such, the central bank noted that risks to the domestic economy remained tilted to the downside, mainly reflecting global factors.