Banks grant more debt holidays
Despite the central bank cutting the repo rate several times this year, private sector credit extension (PSCE) has not shown any significant increase in comparison to previous periods.
Total debt holidays granted to Covid-hit businesses and households have increased from N$9.2 billion in June to N$11 billion at the end of September.
The governor of the Bank of Namibia (BoN), Johannes !Gawaxab, yesterday told Market Watch that commercial banks in June approved about 10 000 applications for debt relief. By the end of last month, this figure was 12 000.
The monetary policy committee (MPC) of the BoN unanimously decided to keep the repo rate unchanged at 3.75%, !Gawaxab said yesterday.
The repo rate is the cost of borrowing by commercial banks from the central banks while consumers borrow from commercial bank at a prime lending rate. This implies that the prime lending rate for commercial banks to consumer's will also remain unchanged at 7.5%.
!Gawaxab said the MPC maintains the unchanged repo rate is appropriate to continue supporting domestic activity, while at the same safeguarding the one-to-one link between the Namibian dollar and the South African rand.
The central bank has lowered its repo by 275 basis points since February, bringing interest rates to historic lows. The repo has dropped from 6.5% at the beginning of 2020. The prime lending rate of commercial banks in the beginning of the year was 10.25%.
Slow credit uptake
Despite the BoN cutting the repo rate several times this year, private sector credit extension (PSCE) has not shown any significant increase in comparison to previous periods.
Average growth in PSCE declined to 4.1% during the first eight months of 2020, lower than the 6.9% recorded over the same period in 2019.
The slowdown in PSCE was due to lower demand for credit and the repayments made by businesses during the period under review.
The growth in credit extended to businesses declined to 1.6% during the first eight months of 2020 compared to 9% over the same period in 2019, !Gawaxab said.
Since the previous MPC meeting, growth in PSCE slowed to 2.6% at the end of August from 2.8% in June this year, mainly due to a lower uptake of credit by businesses.
PANDEMIC
The Covid-19 pandemic has created shocks from both the demand and supply side which caused various uncertainties in the market and hence resulting in low business confidence, !Gawaxab said.
With regard to the recent economic developments, the central bank governor noted that both global and domestic economic activity contracted during the second quarter of 2020 and is further expected to contract for the whole of 2020, before recovering in 2021.
Inflation rates in most monitored advanced economies (AE) and emerging market and developing economies (EMDE) declined in recent months. Monetary policy stances of key monitored economies remained generally accommodative, he added.
The decline in the rate of inflation is mainly attributed to falling energy prices and weak global economic activity. All monitored AE central banks maintained their policy interest rate at their recent monetary policy meetings, with the AE central banks continuing to implement supportive non-conventional monetary policy measures, he said.
Domestic annual average inflation declined to 2.2% during the first nine months of 2020 compared to 4.2% in the corresponding period of 2019. The lower inflation was mainly due to the decline in transport, housing and food inflation.
SECTORS
The contraction in economic activity was mainly reflected in sectors such as mining, manufacturing, tourism, wholesale and retail trade as well as transport and storage. On the contrary, activity in the telecommunication and local electricity generation subsectors improved during the same period.
Going forward, the domestic economy is projected to contract by 7.8% in before a moderate recovery of 2.1% in 2021, !Gawaxab said.
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The governor of the Bank of Namibia (BoN), Johannes !Gawaxab, yesterday told Market Watch that commercial banks in June approved about 10 000 applications for debt relief. By the end of last month, this figure was 12 000.
The monetary policy committee (MPC) of the BoN unanimously decided to keep the repo rate unchanged at 3.75%, !Gawaxab said yesterday.
The repo rate is the cost of borrowing by commercial banks from the central banks while consumers borrow from commercial bank at a prime lending rate. This implies that the prime lending rate for commercial banks to consumer's will also remain unchanged at 7.5%.
!Gawaxab said the MPC maintains the unchanged repo rate is appropriate to continue supporting domestic activity, while at the same safeguarding the one-to-one link between the Namibian dollar and the South African rand.
The central bank has lowered its repo by 275 basis points since February, bringing interest rates to historic lows. The repo has dropped from 6.5% at the beginning of 2020. The prime lending rate of commercial banks in the beginning of the year was 10.25%.
Slow credit uptake
Despite the BoN cutting the repo rate several times this year, private sector credit extension (PSCE) has not shown any significant increase in comparison to previous periods.
Average growth in PSCE declined to 4.1% during the first eight months of 2020, lower than the 6.9% recorded over the same period in 2019.
The slowdown in PSCE was due to lower demand for credit and the repayments made by businesses during the period under review.
The growth in credit extended to businesses declined to 1.6% during the first eight months of 2020 compared to 9% over the same period in 2019, !Gawaxab said.
Since the previous MPC meeting, growth in PSCE slowed to 2.6% at the end of August from 2.8% in June this year, mainly due to a lower uptake of credit by businesses.
PANDEMIC
The Covid-19 pandemic has created shocks from both the demand and supply side which caused various uncertainties in the market and hence resulting in low business confidence, !Gawaxab said.
With regard to the recent economic developments, the central bank governor noted that both global and domestic economic activity contracted during the second quarter of 2020 and is further expected to contract for the whole of 2020, before recovering in 2021.
Inflation rates in most monitored advanced economies (AE) and emerging market and developing economies (EMDE) declined in recent months. Monetary policy stances of key monitored economies remained generally accommodative, he added.
The decline in the rate of inflation is mainly attributed to falling energy prices and weak global economic activity. All monitored AE central banks maintained their policy interest rate at their recent monetary policy meetings, with the AE central banks continuing to implement supportive non-conventional monetary policy measures, he said.
Domestic annual average inflation declined to 2.2% during the first nine months of 2020 compared to 4.2% in the corresponding period of 2019. The lower inflation was mainly due to the decline in transport, housing and food inflation.
SECTORS
The contraction in economic activity was mainly reflected in sectors such as mining, manufacturing, tourism, wholesale and retail trade as well as transport and storage. On the contrary, activity in the telecommunication and local electricity generation subsectors improved during the same period.
Going forward, the domestic economy is projected to contract by 7.8% in before a moderate recovery of 2.1% in 2021, !Gawaxab said.
[email protected]
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