Africa-Press – Namibia. TOUGH economic times continue to prevail as manifested by the increase in the credit extended to the Namibian private sector, which went up by 2,8% year on year (y/y) in February from 2,7% y/y in January 2022.
According to a Simonis Storm Securities analysis, net household debt increased by 2,9% y/y in February, whereas net corporate debt increased by 2,7% y/y in January.
“Corporate credit growth was supported by higher demand for asset-backed credit facilities by corporates in the fishing, transport and financial services sectors according to Bank of Namibia,” said Simonis. Household debt has been increasing by 5,1% on an annualised basis in the last five years, compared to 3,9% for corporate debt, Simonis said.
“We consider a household buying a N$2 million house for a 20-year term. The current average mortgage rate is 8,75% and we forecast a 125bps rate hike by the end of 2022. If mortgage rates increase to 10%, monthly repayments will increase by 9,2% (from N$17 674 to N$19 300).
“How many families will be able to afford this increase, coupled with rising fuel and food prices putting a strain on household budgets?” asked Simonis. The analysts say credit extension remains far below its long-run average of 11,5%, the average calculated for the 2003-2021 period.
“While we forecast 2,5% gross domestic product growth for 2022, we believe that demand for credit will largely remain subdued. We forecast average monthly credit extension of 1,7% in 2022.
“We have noted that about N$13 billion in claims were paid out from life assurance policies in the last two years.
While not all claims were life cover policy payouts, these cash benefits could go a long way in financing fixed asset purchases such as homes and cars, lowering the demand for credit from a household perspective, Simonis said.
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