Economists predict private sector credit extension will slow
JOHANNESBURG - Economists anticipate that private sector credit extension would slow this year as a weak consumer finances impact their ability to take credit.
The South African Reserve Bank (SARB) will tomorrow (THUR) release data for December 2019.
Private sector credit extension has been relatively steady hovering at or above the 6 percent year-on-year mark in 2019.
Growth is forecast to have slowed to 6.3 percent in December, from 6.6 percent in November, on a moderation in the rate of credit extension to both households and corporates.
Chantal Marx, head of investment research at FNB Wealth and Investments, said:
“While we expect much of the same in the December release, we anticipate credit extension to slow in the coming year as a deterioration in consumer finances adversely impacts the ability to take on further credit,” Marx said.
With the inclusion of the December forecast, the credit extension growth increased to an estimated 6.8 percent year-on-year in 2019, from 5.6 percent year-on-year in 2018.
Investec economist Kamilla Kaplan said private sector credit extension growth would be moderate this year.
“A further rise in private sector credit extension growth in 2020 is expected to occur at only a continued modest rate, despite the lower borrowing costs,” Kaplan said.
SARB will also release data for the December trade balance.
The trade balance has registered four consecutive surpluses, rising to R6.1 billion in November, the largest surplus in 2019.
Traditionally, the trade account registers a sizeable surplus in the month of December mainly on account of a steep decline in imports.
A trade surplus of R12bn has been forecast.
“We anticipate another hefty surplus in the December print against the backdrop of relatively buoyant gold and platinum group metal prices supporting nominal export sales,” Marx said.
If the December forecast comes to pass , the trade deficit would reflect a larger surplus of an estimated R22.5bn in 2019 versus a surplus of R15.2bn in 2018.
Kaplan said the increase in the surplus can be ascribed to a sharper slowdown in import growth from 11.3 percent year-on-year 2018 to 4.1 percent year-on-year in 2019, as export growth remained steady at around the 5 percent year-on-year mark.
"Government finances for December are expected to reflect a main budget surplus of R5bn following a deficit of R15.1bn in November," Kaplan said.
"The month of December typically registers a surplus on an increase in corporate tax receipts on provisional payments from those companies with a December year end."