Staff Writer
Simonis Storm has lowered its outlook for private sector credit extension (PSCE), warning that weaker corporate borrowing could keep headline credit growth below its previous forecast through the end of 2026.
The research firm now expects headline PSCE growth to remain in a range of 3.5% to 4.5% through the fourth quarter, compared with its previous forecast of 4.0% to 5.0%.
The downgrade follows July data showing a sharp divergence between household and corporate credit. Headline PSCE growth slowed to 4.2% year-on-year in July from 4.5% in June, with the total loan book declining by N$340 million to N$125.1 billion.
Simonis Storm said the July figures represented a “two-speed month”, with corporate credit contracting while household borrowing continued to strengthen.
Business credit growth slowed to 3.7% from 4.5%, following a monthly decline of N$778.9 million.
The contraction was concentrated in other loans and advances, which fell by N$1.787 billion during the month.
The category’s annual growth consequently moved back into contraction, falling to -3.7% from positive growth of 2.5% in June.
Simonis Storm said this reversal was significant because June had marked the first positive reading for business other loans and advances in four months.
“We had cautioned that one month of improvement was not yet confirmation of a durable turn,” the research firm said, describing the latest decline as its most disappointing data point in the release.
Household credit, meanwhile, accelerated to 4.6% from 4.5%, its strongest reading in more than a year. Household lending increased by N$438.7 million in July, partially offsetting the contraction in corporate credit.
The six-month trajectory for headline PSCE growth has remained relatively range-bound, moving from 4.3% in May to 4.5% in June and 4.2% in July.
Simonis Storm said the durability of the July contraction in corporate other loans and advances would be the key indicator to watch in the next release, as it could determine whether July represented a temporary setback or the start of a broader weakening in corporate credit demand.
The latest credit data came against a stable monetary policy backdrop. The Bank of Namibia kept its repo rate unchanged at 6.75% at its 12 August monetary policy meeting, marking the second consecutive hold following the 25-basis-point increase in June.
Headline inflation also remained unchanged at 4.4% in July, the same rate recorded in June. However, core inflation increased to 3.7% from 3.3%.
Simonis Storm said the stabilisation in headline inflation had provided the Monetary Policy Committee with room to maintain its pause, but warned that the risk of another rate increase was rising.
The research firm expects the next monetary policy decision in October to be influenced by developments in US and South African monetary policy, as well as Namibia’s August and September inflation figures.
It said August’s fuel levy adjustment and subsequent fuel price increase could add further upward pressure to inflation, potentially limiting the Bank of Namibia’s room to maintain the current policy rate.
