Debt relief worth N$65 billion granted last year
The domestic economy is estimated to have contracted by 7.3% in 2020, before returning to a positive growth of 2.6% in 2021.
PHILLEPUS UUSIKU
Namibian commercial banks received about 88 000 debt relief applications and granted relief worth N$65 billion last year. In December alone, N$9.9 billion worth of debt relief was granted.
The top five economic sectors captured approximately 88% of the N$9.9 billion relief granted for the December 2020 period.
Households and businesses took up the largest share of N$ 3.5 billion followed by real estate and business services (N$ 1.7 billion, trade and accommodation sector (N$ 1.4 billion), mining sector (N$385.7 million) and other sectors (N$ 1.7 billion).
The Bank of Namibia (BoN) held its first monetary policy announcement for the year yesterday. After reviewing domestic, regional and global economic developments, they decided to leave the repo rate unchanged at 3.75%.
The repo rate is the cost of borrowing by commercial banks from the central bank. This implies that the prime lending rate for consumers will also remain at 7.50%.
This brings great relief to households and businesses whose operations were severely affected by the Covid-19 pandemic.
Credit uptake
If the central bank make it cheaper for commercial banks to borrow at a repo rate, it means it will also be cheaper for consumers to borrow from commercial banks at a prime lending rate.
However, despite interest rates being low to encourage households and businesses to borrow in order to restructure their operations and eventually stimulate the economy, credit uptake remain extremely poor.
The Bank of Namibia money and banking statistics for December 2020 showed that credit uptake for businesses was back in the negative territory recording -1.2%, while credit extended to households slightly rose to 4.5% at the end of December 2020, from 4.2% at the end of November 2020.
Overall, private sector credit extension (PSCE) growth slowed to 2.0% at the end of December 2020, from a growth rate of 3.1% recorded at the end of November 2020.
Economic developments
Speaking at the event, central bank governor Johannes !Gawaxab said the monetary policy committee (MPC) is of the view that the rate remains appropriate to continue supporting domestic economic activity, while at the same time safeguarding the one-to-one link between the Namibia dollar and the South African rand.
Domestic economic activity slowed considerably in 2020 compared to 2019. Contractions were observed in key sectors such as tourism, wholesale and retail trade, mining, manufacturing, construction, as well as transport and storage. The domestic economy is estimated to have contracted by 7.3% in 2020, before returning to an expected moderate recovery of 2.6% in 2021, he pointed out.
!Gawaxab said the agriculture and mining sectors are expected to drive growth as Namibia has received good rainfall.
“Namibia's long-term growth potential is unquestionable, we just need to pull the necessary investment,” he pointed out.
Namibia has exhausted 75% of its drivers for growth with both local and foreign direct investment (FDI) being the only hope to drive growth. However, policy certainty is very crucial in attracting the necessary investment.
Price monster
Annual average inflation declined to 2.2% in 2020 compared to 3.7% in 2019. The lower inflation was mainly driven by the decline in transport and housing inflation, mainly on account of the low international price of fuel coupled with deflationary pressure emanating from the weak rental market, the central bank governor said.
However, Namibia Statistic Agency (NSA) Consumer Price Index (CPI) statistics for January showed that annual overall inflation rate in January was 2.7%, slightly higher than the 2.4% of the previous month.
This has price and income negative effects on consumers as they will be required to make some adjustments to their budgets. They will be required to either cut down on their consumption levels or alternatively increase their budget if the wish to maintain their consumption levels as the domestic currency has lost purchasing power.
– [email protected]
Namibian commercial banks received about 88 000 debt relief applications and granted relief worth N$65 billion last year. In December alone, N$9.9 billion worth of debt relief was granted.
The top five economic sectors captured approximately 88% of the N$9.9 billion relief granted for the December 2020 period.
Households and businesses took up the largest share of N$ 3.5 billion followed by real estate and business services (N$ 1.7 billion, trade and accommodation sector (N$ 1.4 billion), mining sector (N$385.7 million) and other sectors (N$ 1.7 billion).
The Bank of Namibia (BoN) held its first monetary policy announcement for the year yesterday. After reviewing domestic, regional and global economic developments, they decided to leave the repo rate unchanged at 3.75%.
The repo rate is the cost of borrowing by commercial banks from the central bank. This implies that the prime lending rate for consumers will also remain at 7.50%.
This brings great relief to households and businesses whose operations were severely affected by the Covid-19 pandemic.
Credit uptake
If the central bank make it cheaper for commercial banks to borrow at a repo rate, it means it will also be cheaper for consumers to borrow from commercial banks at a prime lending rate.
However, despite interest rates being low to encourage households and businesses to borrow in order to restructure their operations and eventually stimulate the economy, credit uptake remain extremely poor.
The Bank of Namibia money and banking statistics for December 2020 showed that credit uptake for businesses was back in the negative territory recording -1.2%, while credit extended to households slightly rose to 4.5% at the end of December 2020, from 4.2% at the end of November 2020.
Overall, private sector credit extension (PSCE) growth slowed to 2.0% at the end of December 2020, from a growth rate of 3.1% recorded at the end of November 2020.
Economic developments
Speaking at the event, central bank governor Johannes !Gawaxab said the monetary policy committee (MPC) is of the view that the rate remains appropriate to continue supporting domestic economic activity, while at the same time safeguarding the one-to-one link between the Namibia dollar and the South African rand.
Domestic economic activity slowed considerably in 2020 compared to 2019. Contractions were observed in key sectors such as tourism, wholesale and retail trade, mining, manufacturing, construction, as well as transport and storage. The domestic economy is estimated to have contracted by 7.3% in 2020, before returning to an expected moderate recovery of 2.6% in 2021, he pointed out.
!Gawaxab said the agriculture and mining sectors are expected to drive growth as Namibia has received good rainfall.
“Namibia's long-term growth potential is unquestionable, we just need to pull the necessary investment,” he pointed out.
Namibia has exhausted 75% of its drivers for growth with both local and foreign direct investment (FDI) being the only hope to drive growth. However, policy certainty is very crucial in attracting the necessary investment.
Price monster
Annual average inflation declined to 2.2% in 2020 compared to 3.7% in 2019. The lower inflation was mainly driven by the decline in transport and housing inflation, mainly on account of the low international price of fuel coupled with deflationary pressure emanating from the weak rental market, the central bank governor said.
However, Namibia Statistic Agency (NSA) Consumer Price Index (CPI) statistics for January showed that annual overall inflation rate in January was 2.7%, slightly higher than the 2.4% of the previous month.
This has price and income negative effects on consumers as they will be required to make some adjustments to their budgets. They will be required to either cut down on their consumption levels or alternatively increase their budget if the wish to maintain their consumption levels as the domestic currency has lost purchasing power.
– [email protected]
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