March marks slowest start to credit extended

The month of March is the slowest pace for Private Sector Credit Extended (PSCE) in a decade, showing a low 1.3% year-on-year (y-o-y) growth from the same period in 2023.

“In March, private sector credit extension experienced sluggish of 1.3% y-o-y, reflecting a slowdown from February’s 1.7% y-o-y and a sharp decline from the 3.9% y-o-y observed in March 2023. This represents the slowest pace of PSCE growth in the last decade. For the first quarter of 2024, the average annual credit growth further softened to 1.8% y/y, compared to 3.2% y/y in the same quarter of the previous year,” Simonis Storm said regarding the recent release of the credit figures by the Bank of Namibia (BoN).

According to the wealth management company, the decline in March's credit extension can be attributed to reduced demand and increased net repayments across both household and corporate sectors. “Year-to-date data suggests that there are no indications of improvement in credit growth,” Simonis Storm said.

“Household budgets continue to be challenged by rising debt repayments in the face of now rising fuel prices,” it added.

Data provided by the central bank shows that in March, household credit extension decreased for the ninth consecutive month to 2.2% y-o-y, compared to 2.4% y-o-y in February and also the lowest since August 2022. Household credit growth was mainly supported by growth in overdrafts, with growth of 16.3% y-o-y in March - but lower than 18.5% y-o-y recorded in February.

Corporate credit uptake persisted in its downward trajectory, diminishing to 0.1% in March, marking the second consecutive month of decline.

Credit uptake was mainly supported by instalment and leasing instruments, but offset by the rest of debt instruments. The decrease in the growth of credit advanced to businesses was on account of lower demand and repayments by corporates in the wholesale and retail trade, manufacturing as well as the financial services sectors, according to BoN data.

“The decision to maintain the repo rate at this juncture reflects a cautious yet supportive approach by the BoN, balancing the need to foster economic recovery with the imperative to keep inflation within manageable limits. The potential for rate cuts later in the year will hinge on these trends continuing positively, alongside favourable global economic conditions,” Simonis Storm said.