Sat Oct 22 23:38:20 SAST 2016

Less credit to spread around in short term

By unknown | Mar 31, 2009 | COMMENTS [ 0 ]

Zweli Mokgata

Zweli Mokgata

Credit extended to consumers is expected to come under pressure this year as unemployment rises and mortgages stay out of reach of the majority of South Africans.

The South African Reserve Bank said yesterday annual growth in public sector credit extension had slowed to 11,05percent in February - compared to January's 11,85percent.

Standard Bank economist Shireen Darmalingam said she expected the figure to fall further - into single digits - in the second quarter of the year.

"Growth in private sector credit extension is likely to remain pressured until economic fundamentals start providing a more even playing field," Darmalingam said.

"However consumers should not hasten when credit starts easing as consolidation debt positions should remain a priority."

She said the short-term outlook for the economy would be strained although an improved inflation profile with an easing in monetary policy [in the form of interest rate cuts] in the coming months would provide some reprieve.

John Loos, property strategist at First National Bank, said the slowdown showed a "stalling in the march towards a more manageable debt situation, but this stalling is only temporary.

"This confirms the continuation of the multi-year slowdown in growth, albeit only very slightly."

He also agreed that the downward trend would continue, and that mortgages were the dominant drivers of the slowing.


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