Credit growth hopes to re­bound

The New Age (Western Cape) - - Business - BERNARD SATHEKGE bernards@the­newage.co.za

GROWTH in credit de­mand by the pri­vate sec­tor ac­cel­er­ated 6.7% year on year, from 6.5%, and econ­o­mists said this was due to a mas­sive in­crease in the in­vest­ment cat­e­gory, Re­serve Bank data showed yes­ter­day.

The con­sen­sus among econ­o­mists was for 6.1%.

Money sup­ply (M3) growth eased to 6.4% in De­cem­ber, slightly lower than the mar­ket’s fore­cast of 6.5% from 6.6% in Novem­ber.

Over the month, M3 grew by 0.2% due to a strong rise in net claims on the pri­vate sec­tor and in net other as­sets and li­a­bil­i­ties.

Jo­hannes Khosa, Nedbank econ­o­mist, said: “Growth in pri­vate sec­tor credit ex­ten­sion ac­cel­er­ated more than ex­pected.

“This was due to a mas­sive in­crease in the in­vest­ments cat­e­gory rather than any pickup in ac­tiv­ity-re­lated to credit ex­ten­sion.

“The lat­est fig­ures, to­gether with other re­cent in­di­ca­tors sug­gest that eco­nomic ac­tiv­ity re­mained rel­a­tively firm in the fourth quar­ter of 2017.”

How­ever, Khosa said much still needed to hap­pen po­lit­i­cally be­fore re­cent pos­i­tive news trans­lates into sus­tained rand strength and there­fore lower in­fla­tion and in­ter­est rates.

He said dur­ing the month, the 0.2% rise was driven by a strong in­crease in net claims on the pri­vate sec­tor and net other as­sets and li­a­bil­i­ties, which rose by R38.5bn and R56.5bn re­spec­tively.

“For now, our fore­cast is for rates to re­main un­changed through­out 2018 be­fore in­creas­ing by 25 ba­sis points each in Septem­ber 2019 and Jan­uary 2020,” he said.

In ad­di­tion, Khosa said go­ing for­ward, credit de­mand was likely to im­prove grad­u­ally in 2018 as eco­nomic growth picks up and con­fi­dence im­proves fol­low­ing the change of lead­er­ship in the rul­ing party steady in­ter­est rates and softer in­fla­tion sup­port house­hold credit af­ford­abil­ity.

Some an­a­lysts said this en­cour­ag­ing signs in credit growth and pos­i­tive prospects for GDP growth came at the right time as banks had been heav­ily im­pacted by weak credit growth on the back of lower con­fi­dence and weak eco­nomic growth.

This is be­cause their pri­mary busi­ness is to pro­vide loans to cus­tomers in re­turn for in­ter­est pay­ments.

As eco­nomic en­vi­ron­ment im­proves and cus­tomers are more will­ing to spend, de­mand for credit grows.

Both un­se­cured lend­ing to house­holds and busi­ness in­creased slightly on a month on month ba­sis and are likely to see busi­ness in­vest­ing back as the do­mes­tic econ­omy is poised for a pos­i­tive growth this year.

UN­EX­PECTED GROWTH: Nedbank econ­o­mist Jo­hannes Khosa.

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