13 May 2016 07:30am
WINDHOEK, 13 MAY (NAMPA) - The Namibian financial system has remained robust despite a rise in household indebtedness and some adverse developments in the global economy.
The Deputy Governor at the Bank of Namibia (BoN) Ebson Uanguta revealed this during the launch of the 2016 Financial Stability Report here on Thursday.
Household indebtedness remained higher than comparator economies and warrants targeted strategies to reduce risks to financial system stability. In addition, the level of foreign debt exposure by the corporate sector requires monitoring.
On the international front, a slowdown in China and declining commodity prices particularly for uranium, copper and zinc posed a potentially negative impact on financial stability, he noted.
The Namibian financial system has, nonetheless, coped well with shocks to financial stability in the period under review, Uanguta said.
The Namibian financial system remained stable in 2015, characterised by a sound, profitable and adequately capitalised banking sector with a relatively low level of non-performing loans.
The BoN said the performance of the non-banking financial sector was strong during 2015, as its balance sheet remained robust. The payment system also operated efficiently and effectively.
Since the last report issued in 2015, uncertainty and weakening global growth prospects have increased risks to financial stability.
These developments have tightened financial conditions, reduced risk appetite, raised credit risks, and constrained household and corporate balance sheets.
In addition, the global growth outlook has deteriorated in advanced economies as a result of declining confidence, while the fall in commodity prices and slower economic growth have kept risks elevated in emerging market economies. Financial spill-over from such markets have also risen substantially, implying their importance when assessing macro-financial conditions.
Uanguta further noted that the local economy recorded respectable growth in 2015 although it was slower than that of the preceding year. Real growth was largely driven by construction, wholesale and retail trade, complemented by public services.
On the downside, the agricultural sector was estimated to have contracted during 2015, mainly as a result of the adverse effects of the drought.
Looking ahead, economic activities are expected to continue registering a positive increase. Nonetheless risks remain and include the slowdown in the economies of Namibias main trading partners, sluggish commodity prices, volatile exchange rates and the impact of the prevalent drought conditions, he added.