Slowdown in credit growth

2011-07-01 00:00

kavith harrilall

THE lending activities of banks and other financial institutions remained steady in May, pointing to a lacklustre recovery in credit uptake, particularly when it comes to corporate credit demand.

According to the latest statistics from the SA Reserve Bank, domestic credit growth in May 2011 came in at 5,2%.

Although there remains positive growth in private sector credit extension, the rate of growth in May is one percentage point lower than the 6,2% growth recorded in April 2011.

The data prompted economists to stick to their view that the first interest rate hike in the rate-hiking cycle will only take place in the first quarter of next year.

Growth in credit demand from the corporate sector dropped by 0,8% month on month.

Credit demand from corporates remained positive on a year-on-year basis, coming in at 3,7% in May. However, this was significantly lower than the 4,9% year-on-year growth recorded in April.

The overall credit growth figures were held up largely by steady demand in the household sector as a result of consistently lower interest rates and positive income growth in recent quarters.

Economists expect credit growth to remain in positive territory in the coming months.

However, they remain concerned about a lack of credit uptake in the corporate sector.

Noted Nedbank’s Group Economic Unit, “Corporate demand for credit will remain relatively subdued …”

This is “businesses will probably be hesitant to expand operations too aggressively given lingering uncertainties over the strength of the local and global recoveries, significant power and transport infrastructure constraints and ample spare capacity in some sectors”.

The growth in the M3 money supply was 6,14% in May 2011. The growth in M3 has been declining steadily in 2011.

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions. publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.