Africa-Press – Namibia. THERE’S no stopping the growth of household debt levels, with Namibians borrowing N$4,6 million daily last year.
Most of this was spent on houses and personal loans. At the end of 2021, this ever-changing balance was sitting at N$61,8 billion, an analysis of banking statistics data by Simonis Storm Securities shows.
“The household debt stock increased by 2,1%, compared to the N$60,5 billion recorded in December 2020,” the wealth management firm said.
Corporate sector debt contracted by 1,3% – from N$44,9 billion in January 2021 to N$44,3 billion in December 2021, translating to a daily repayment of about N$1,7 million, the analysis said.
The household and corporate debt stock accounted for about 25,3% and 35,3% of nominal gross domestic product (GDP) at the end of 2021, compared to 25,3% and 34,6% in 2020.
“We expect the Bank of Namibia (BoN) to hike the repo rate by 125 basis points in 2022, increasing the repo rate from 3,75% to 5%, and subsequently taking the prime interest rate from 7,50% to 8,75% by the end of 2022.
“We expect demand for credit to remain subdued – not only due to solvency concerns in the private sector as a result of a low growth environment, but also due to commercial banks growing more cautious and risk averse in lending to the public.
“For example, we are aware that many clients at various dealerships have seen their car loan applications being rejected by the banks,” Simonis said.
Another factor would be that banks will start earning higher interest rates on shorter-term deposits and money-market securities, increasing the risk trade-off between lending to clients versus safely earning higher yields, the report said.
“Growth in credit extension averaged 2,4% in 2021, compared to our forecast of 2,5%. We forecast average credit growth of 1,7% in 2022,” the analysis read. Credit extended to the private sector moderated to 1,2% year on year (y/y) in December 2021 from 1,7% y/y in November 2021.
The modest increase in credit growth was driven by an increase in household credit of 2,1% y/y in December 2021, compared to 2,5% y/y in November 2021, with all sub-categories recording positive growth, except overdrafts.
Corporate sector credit growth moderated to -0,1% y/y in December 2021, compared to 0,6% y/y growth recorded in November 2021. Repayments and lower demand in mortgage loans and overdrafts by businesses in the commercial services sector weighed most on corporate credit extension, according to the BoN.
According to Simonis, the biggest contributors to household debt were other loans and advances, including credit card debt increasing by 2,8% y/y in December 2021, compared to 2,3% y/y in the prior month, and mortgage loans increasing by 2,6% y/y in December 2021, compared to 3,4% y/y in the prior month.
Both instalment and overdraft credit decreased for a second consecutive month. Instalment and leasing credit contracted by 31,5% y/y in December 2021, compared to -0,4% y/y in the prior month.
Overdrafts decreased by 3,3% y/y in December 2021, compared to -3,8% y/y in the prior month. Moderated corporate borrowing was mainly attributed to overdrafts, which decreased by 13,1% y/y in December 2021, compared to -7,1% y/y in the prior month.
Mortgage loans increased by 5,8% y/y in December 2021, compared to 6,1% y/y in the prior month. Instalment and leasing credit increased by 5,6% y/y in December 2021, compared to 7,9% y/y in the prior month.
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