No further macroprudential intervention required – BoN

Martin Endjala

The Macroprudential Oversight Committee (MOC) of the Bank of Namibia, has determined that no further macroprudential policy intervention is required at this stage.

The Bank will, however, continue to monitor the developments and when warranted, take the necessary remedial macroprudential action with the tools at its disposal.

This is according to BoN Governor Johannes !Gawaxab, who shed light on the MOC’s last meeting held last year on 07 December 2023 to assess potential risks and vulnerabilities in the Namibian Financial System.

The Governor highlighted that following a comprehensive assessment of domestic and global economic conditions, the Committee deemed the domestic financial system as stable, sound, and resilient.

This is despite increasing risks and vulnerabilities stemming from both the domestic and global spheres.

In addition, he said the financial sector demonstrated resilience through maintaining adequate capital and liquidity buffers to absorb the impact of shocks, while simultaneously ensuring that the payment infrastructure operated efficiently.

In the meantime, no further macroprudential policy actions are warranted at this stage. The MOC, however, emphasised continuous monitoring of inflationary pressures, high interest rates and slow domestic and global recovery, which could adversely impact the financial system.

Furthermore, the MOC further observed that global financial stability risks remain elevated putting strain on the resilience of the global financial system.

This stems from heightened geopolitical risks, persistent inflationary pressures, tight monetary policy conditions, a slowdown in economic growth and the risk of a repricing of assets in international money and capital markets.

Despite the global easing of inflation, core inflation remains high in various economies, necessitating higher interest rates for longer to bring inflation within the target rates of various central banks.

The International Monetary Fund anticipates global growth to slow to 3.0 percent in 2023, from 3.5 percent in 2022 and moderate further to 2.9 percent in 2024.

The downside risks to the global economic outlook remain high inflation and interest rates, geopolitical tensions, geopolitical fragmentation, and weak property markets, as borrower debt repayment capacity diminishes.

Meanwhile, the MOC welcomes the revised Loan-To-Value (LTV) regulation that came into effect on 31 October 2023 and will continue to monitor the developments within the property market given the relaxed LTV limits.

“Notwithstanding the recovery witnessed in the domestic economy, as well as the sound and stable financial sector, activity in the housing and construction sectors remains muted. This lacklustre performance has been further exacerbated by the dampened credit extension particularly for the property market, contributing to the ongoing sluggish growth observed within this sector,” !Gawaxab said.

In response to the prolonged periods of subdued growth and dampened credit growth observed in the construction sector, the MOC reflected on the existing LTV regulation which was introduced as a macroprudential tool to contain speculative behaviour in the housing market and recommended their further relaxation.

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