By Hilary Mare
MAINLY due to the effect of the Eurobond raised in October 2015, foreign reserves have remained sufficient coming in slightly higher at N$24.8 billion during May 2016 compared to N$24.7 billion recorded in April 2016.
However, Simonis and Storm Securities director Purvence Heur contends that foreign reserves will be under pressure this year owing to expected slowing GDP growth.
“The Angolan economy remains under pressure due to its high reliance on the oil market and its current depressed market prices. Angolan government officials recently suspended talks for financial aid with the IMF. It remains unclear as to why this is. It does however poses the question as to whether Banco Nacional de Angola will be able to pay back the US$20million quarterly instalments to settle the current outstanding amount of US$366million owed to the Bank of Namibia,” he questioned.
Foreign reserves are still at higher levels compared to N$13.7 billion in May 2015.
On the other hand, the growth in secured lending has been trending downward since August 2015 at 16.8 percent y-o-y, before settling at 11.7 percent at the end of May 2016. This essentially means that issuance of loans that are protected by an asset or collateral are declining gradually. Moreover, borrowing through unsecured lending has declined drastically to 9.9 percent y-o-y compared to 13.7 percent in the prior year.
Overall debt continued to grow, albeit at a slower pace of 14.5 percent y-o-y compared to 16.2 percent in the prior year. On a monthly basis, debt grew by 1.1 percent in May 2016 compared to 1.7 percent in April 2016. Government continues to be the main driver of growth in the economy and this is evident in the 35.4 percent growth in bonds y-o-y.
“With a shrinking private sector and a growing public sector as a percentage of GDP we worry that economic activity can be sustained. We do however believe that the mining sector will surprise to the upside with the gold market doing well and the Husab Uranium Mine expected to start production in Q3 2016,” Heur said.
Private Sector Credit Extension (PSCE) continues to grow at a slower pace. The y-o-y growth was 11.1 percent compared to the 15.4 percent recorded in the prior year. The slow growth in PSCE can be attributed to a slowing demand for credit instruments especially through overdraft facilities and loans and advances. In addition to the higher interest rate environment of 7.00 percent compared 6.00 percent – 6.25 percent in the first half of 2015, we believe that higher inflation expectations, the water crisis and increasing municipal tariffs will put further pressure on corporates and households. Disposable incomes will therefore be further depressed.
Meanwhile, instalment credit and mortgage loans rose slightly by
0.6 percent m-o-m and 0.9 percent m-o-m, respectively in May 2016 compared to -0.5 percent m-o-m and 0.6 percent respectively in the prior month. However, on an annual basis, Instalment credit is still growing at a slower pace of 8.4 percent compared to 18.1 percent growth in the prior year. Mortgage loans grew by 12.7 percent y-o-y compared to 15.9 percent in the prior year.
“Growth in instalment credit can be attributed to the increasing number of new vehicle sales which were mainly prompted by a healthy appetite for new models in the industry. Furthermore, the construction sector grew at a significantly slower pace of 0.2 percent in the 1Q2016 compared to 34.5 percent recorded in 1Q2015. We expect slowing construction activity to continue. Thus, we are likely to see further deceleration in the growth rate of mortgage loans,” extended Heur.
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