By Hilary Mare
GIVEN the dire economic state of the construction sector, as evidenced by a significant contraction in the building of new residential properties, Simonis and Storm Securities (SSS) has encouraged the Bank of Namibia (BoN) to cut the country’s interest rate further.
While analysing the continued contraction in the number of building plans approved within the Windhoek municipal area by September 2017, SSS trainee analyst Indileni Nanghonga, told Confidente that the securities firm is of the view that another interest rate cut would improve the status quo.
“We believe that an additional interest rate cut may be justifiable, to improve the status quo. Mortgage loans remain low, at 7.7 percent in August 2017, another indicator that households and corporates remain under pressure,” she said.
The number of building plans approved within the Windhoek municipal area by September 2017 contracted by 12.8 percent for the year-to-date (YTD), to 1 889 units, compared to a contraction of 23 percent for the YTD in the prior year.
Confidente can also confirm that on a monthly basis, building plans approvals declined by 52.5 percent, compared to an increase of 25.3 percent in the prior month. In addition, the number of buildings completed also contracted by 23.3 percent for the YTD, to 345 units, compared to a contraction of 30.8 percent for the YTD in September 2016.
On a monthly basis, buildings completed remain muted in September 2017, following a contraction of 18.9 percent recorded in the prior month. The overall contraction in the number of building plans approved was more pronounced in the category of ‘additions’, which contracted by 60.1 percent on a month-on-month (m-o-m) basis.
In monetary terms, the value of buildings completed continued to contract by 21.8 percent for the YTD, to N$389 million in September 2017, compared to a contraction of 18.9 percent for the YTD in the prior year.
“The reduction in the value of buildings completed to date could be partially explained by a declining trend in the level of inflation and may suggest stabilising house prices,” Nanghonga explained.
The Economist also reported last week that the consensus opinion among analysts is that the relatively lower and stable inflation reading will allow the BoN some space for one more interest rate cut in the remainder of the year, but not at the immediate next assessment by the Monetary Policy Committee, which is due on 25 October. If the interest rate remains unchanged at the next assessment, this will follow in the footsteps of the South African Reserve Bank, which decided to keep the neighbouring country’s repo rate stable at 6.75 percent, at its last meeting earlier this month.
In related news, the Namibia Statistics Agency (NSA) released its trade statistics for the second quarter 2017 recently, which showed that the total value of imports decreasing slightly by N$379 million, to N$20.1 billion, compared to the first quarter 2017, while the value of exports took a stronger hit and dropped by N$1.6 billion to N$13.9 billion.
Consequently, the trade deficit increased to N$6.1 billion – up by N$1.3 billion, when compared to the first quarter.
“Despite a slight acceleration of price increases, we expect the annual inflation rate to remain below last year’s (average annual) inflation rate of 6.7 percent. Relatively modest price increases for food products remain good news, in particular for low-income earners and the poor, who spend a much larger share of their income on food than the average Namibian household (16.5 percent). The decision to leave fuel prices unchanged in October will reduce price pressure on transportation costs, with a subsequent positive impact on the inflation rate in October,” Economic Association of Namibia (EAN) Executive Director, Klaus Schade, said.
Confidente. Lifting the Lid. Copyright © 2015