WINDHOEK – Namibia’s annual growth in broad money supply (M2) increased at the end of January 2019. According to the latest Money and Statistics report by the Bank of Namibia (BoN), the 12-month growth in M2 increased to 7.6 percent at the end of January 2019, relative to 6.4 percent recorded at the end of December 2018.
The annual growth in M2 increased by 1.2 percentage points month-on-month to 7.6 percent at the end of January 2019. The increase in M2 was driven by an increase in domestic claims, specifically net claims on central government. “This increase was reflected in the increased growth rates for other deposits, particularly those of the regional and local government as well as those of the other resident sector,” read BoN’s report.
However, the report reveals that the overall liquidity position of the banking sector decreased considerably in January 2019. The banking industry’s overall liquidity position significantly declined to N$262.1 million in January 2019, from a high of N$2.8 billion in December 2018. The decline was mainly due to corporate tax payments made at the end of December 2018, as well as the customary slow spending from the Government during January of each year.
The report also shows that growth in private sector credit extension (PSCE) moderated at the end of January 2019. The annual growth in PSCE stood at 6.5 percent at the end of January 2019, decreasing by 0.2 percentage point, month-on-month. The slower growth in PSCE was driven by lower demand for credit by households as well as businesses during the period under review.
Also, growth in total credit extended to businesses slowed further during January 2019. The annual growth in credit extended to businesses moderated to 6.3 percent at the end of January 2019, down from 6.5 percent at the end of December 2018. The modest growth reflects declines in the growth of mortgage credit, the slow uptake of overdraft credit as well as the repayments of instalment credit by corporations.
Growth in credit extended to the household sector eased to a five-month low during January 2019. Total credit extended to the household sector decreased modestly to 6.7 percent at the end of the January 2019. The slower growth in credit extended to the household sector was attributed to the lower uptake of overdraft and instalment credit, during the month under review.
The annual growth in total overdraft credit slowed during January 2019. The annual growth in overdraft credit stood at 9.1 percent in January 2019, representing 1.0 percentage point decrease month-on-month. The decline reflected the slow uptake by both businesses and households during the period under review.
Annual growth in other loans and advances such as personal and commercial loans and credit cards rose during January 2019. The annual growth in other loans and advances posted 23 percent at the end of January 2019, 1.4 percentage points up from the growth in December 2018. The increase in other loans and advances mainly emanated from the business sector, particularly in the manufacturing and fishing sectors, supported by a marginal increase from the household sector.
Growth in instalment sales contracted further during the period under review. Annual growth in instalment sales contracted by 0.1 percentage point to 7.6 percent at the end of January 2019, relative to previous month. The persistent sluggish growth observed in instalment sales is in line with the weak domestic economy and is further reflected in the developments observed in vehicles sales during the period under review.
The annual growth in mortgage credit extended to the private sector remained constant at the end of January 2019, compared to the preceding month. Growth in mortgage credit stood at 6.5 percent at the end of January 2019, similar the preceding month. During the period under review, the increase in mortgage credit extended to the household sector was offset by decline in mortgage credit extended to the business sector, hence the steady movement month-on-month.
The stock of international reserves held by the Bank of Namibia, a crucial factor for the one-to-one peg with the South African Rand, fell on a monthly basis at the end of January 2019. The stock of foreign reserves decreased by 1.1 percent, month-on-month, to N$30.7 billion at the end of January 2019. The month-on-month decline in reserves was mainly due to net purchases of the South African Rand by commercial banks for purposes of investments abroad and import payments.
The report further confirmed that the country’s overall inflation rate decelerated during January 2019. The annual inflation rate declined to 4.7 percent in January 2019, compared to 5.1 percent recorded in December 2018.