Macro Pulse

Private Sector Credit Extension – June ´25

Namibia’s private sector credit growth accelerated to 5.7% y/y in June 2025, up from 4.1% in May, the fastest pace since early 2020. This marks a turning point in the credit cycle, as monetary easing begins to transmit into the real economy. Notably, growth is being driven by corporate rather than household demand.

Corporate Credit Trends

Corporate credit rose by 10.6% y/y, the strongest pace since May 2019, underpinned by renewed momentum in mining, energy, retail, and manufacturing. Overdraft facilities surged to 17.4% y/y (up from 6.0%), largely due to real estate developers and manufacturers funding development pipelines and rising output needs. Asset-backed lending also gained traction, with installment and leasing credit growing 17.4% y/y, in line with a 32.2% jump in new vehicle sales. Other loans and advances rose by 8.3% y/y.

Corporate credit stock reached N$50.88 billion, supported by a N$802 million net increase in borrowing during the month. Instalment and leasing credit rose 19.9% y/y (from 13.1% in May), reflecting strong demand for vehicles, machinery, and industrial equipment. Meanwhile, other loans and advances expanded by 9.8% y/y, indicating greater longterm financial planning.

Mortgage lending remained in contraction, falling 0.2% y/y, weighed down by subdued demand for commercial real estate amid high construction costs and delayed large-scale projects.

Overall, corporate borrowing is shifting toward productive and expansionary uses. With the policy rate at 6.75% and potential for a further 25bps cut later in 2025, monetary conditions remain favourable. Importantly, borrowing appears more disciplined and investment-led, not driven by speculative excess.

Household Credit Trends

Household credit rose just 2.4% y/y in June (from 2.5% in May), the slowest pace this year. While the stock of household debt increased from N$205 million to N$69.3 billion, consumers remain cautious due to weak income growth and high living costs.

Mortgage credit contracted by 0.5% y/y for a third straight month. Despite a sizeable N$45.9 billion mortgage book, credit remains concentrated among financially resilient households. Structural affordability barriers, high property prices, elevated interest burdens, and tight lending conditions, continue to exclude lower- and middle-income buyers.

Other loans and advances ticked up to 6.0% y/y, though this does not indicate a broad-based improvement. Middleincome consumers remain selective, facing income pressures and uncertain economic outlooks.

In contrast, installment and leasing credit increased 15.4% y/y, driven by vehicle financing among middle- and upperincome earners. Strong car sales and stable interest rates supported this segment.

Household credit demand remains focused on secured, assetlinked borrowing. Without real wage growth or easing inflation, overall household credit growth will likely remain subdued.

The credit mix is becoming more growth-oriented, with rising allocations to investment-linked activity rather than consumption. This shift supports the view that a broad-based recovery is building, particularly in the corporate segment. While households remain constrained, businesses are showing stronger confidence and medium-term planning.

Our Take

Inflation Outlook: Risks Reasserting for the Second Half of 2025

Namibia’s annual inflation rate rose to 3.7% in June (from 3.5% in May), ending a short-lived disinflationary trend. Food and housing drove the increase, with offsetting effects from transport.

While inflation remains below 4.0%, upside risks are mounting. We expect inflation to exceed 4.0% in H2 2025, driven by external shocks and imported cost pressures. The temporary relief from fuel price cuts based on earlier over-recoveries is likely to fade.

The 30% U.S. tariff on South African exports, alongside continued U.S.–China trade friction, introduces twin external shocks. These are set to disrupt regional supply chains and inflate local logistics and input costs. In the short term, surplus South African goods may offer some price relief. But as SA production contracts and manufacturers retrench, Namibia will face longer lead times, higher prices for goods, and reduced availability of parts and services.

The weakening rand may temporarily benefit importers but is expected to pass through to domestic inflation as regional suppliers reprice to protect margins. Namibia may thus import volatility alongside goods, reflecting deeper exposure to regional trade distortions.

Global factors, including geopolitical instability in Eastern Europe and the Middle East, compound the risk of a renewed surge in fuel and input prices. Regionally, South Africa’s structural issues (rising costs, food safety shocks, and supply disruptions) are already filtering into Namibia via shared retail and food supply chains.

These risks suggest that the Bank of Namibia’s room for further monetary easing is narrowing. Although PSCE data support continued accommodation, rising imported inflation could limit future rate cuts.

Monetary Policy Outlook: Gradual Easing Expected

The BoN held its repo rate at 6.75% in June 2025, consistent with market expectations. Its stance reflects a careful balance between supporting recovery and defending the currency peg to the South African rand.

The South African Reserve Bank’s 25bps cut in August narrowed the SA–Namibia rate differential to 25bps. While Namibia’s inflation remains below the BoN’s 4.5% target midpoint, rising cost pressures require a cautious approach.

We maintain our base case for a final 25bps rate cut in H2 2025, lowering the repo rate to 6.50%, conditional on inflation containment and stable external conditions. This would provide welcome relief for interest-sensitive sectors.

A modest cut could have several benefits:

• Lower household borrowing costs across mortgages, overdrafts, and personal loans are key to reigniting consumption.

• Support for SME financing, as overdraft credit rose 17.4% y/y in June, indicating liquidity dependence.

• Potential revival in mortgage uptake, which contracted 0.3% y/y in June, as lower rates improve affordability.

Encouragingly, monetary transmission is gaining traction. PSCE growth at 5.7% y/y is the strongest since March 2020, suggesting a positive inflection in credit dynamics. We expect PSCE to exceed 6.0% y/y in H2 2025, driven by:

• A repo rate cut to 6.50% and tighter repo–prime spreads, reducing borrowing costs.

• Stronger corporate appetite for investment in manufacturing, mining, and energy.

• Gradual household credit recovery, especially in secured lending for vehicles and durable goods.

Namibia’s credit landscape is slowly improving, led by disciplined and growth-focused corporate borrowing. While household credit remains cautious, signs of resilience are emerging in specific segments. Inflation risks, largely external, could constrain policy flexibility, but the BoN’s current stance appears prudent. If global conditions remain manageable, further policy easing could reinforce momentum positioning Namibia for a more credit-led, investment-driven recovery in the second half of 2025.

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