By Hilary Mare
THE Bank of Namibia (BoN) money and banking statistics for April have revealed higher demand for commercial property loans which has caused Private sector credit extension (PSCE) to surge.
PSCE increased to 5.8 percent at the end of April 2018, a 0.1 percentage point increase compared to the preceding month.
Meameno Johannes, a trainee analyst at Simonis and Storm Securities told Confidente that the uptick in PSCE was driven by an increase in demand for mortgage credit by the corporate sector which increased to 7.9 percent at the end of April 2018 from 5.9 percent in the prior month.
“BoN highlighted the increase was mainly driven by a rising demand for commercial property loans by the business sector. This is a positive sign for the economy as mortgage loans are long term commitments,” he said.
Furthermore, instalment credit and overdrafts reported negative growths of 1.32 percent m-o-m and 1.59 percent m-o-m respectively as at the end of April 2018, which resulted in a slow growth of PSCE.
“The contraction in credit instalments was reflected in lower demand for vehicles in April, which declined by 27.8 percent m-o-m compared to an increase of 9.9 percent reported in the prior month. We expect PSCE to continue growing at a slow pace as the economy continues to struggle,” added Johannes.
With a tight monetary policy stance, the report also notes that annual growth in broad money supply (M2) slowed at the end of April 2018 to 4.4 percent y-o-y compared to a growth of 7.7 percent reported in the prior month.
The slow growth in M2 according to the BoN was supported by the contraction in the growth of net foreign assets (NFA) of the depository corporations.
“This was due to a decline in claims of non-residents in the form of foreign investment withdrawals during April 2018,” the report notes.
Credit extended to individuals moderated to 7.0 percent from 7.2 percent recorded in the prior month. This decrease was mainly due to the decrease in instalment credit which fell by 1.32 percent m-o-m and 5.16 percent y-o-y.
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