Drop in demand for credit in South Africa

Jan 29, 2010

Demand for credit in South Africa contracted in December for the third month in a row, according to the country's Reserve Bank.

Statistics from the organisation showed that private sector borrowing demand was down by 0.76 per cent year-on-year during the month.

Despite the country recently pulling out of recession, many households and businesses appear to have curtailed their spending.

Recently, South Africa's central bank decided to keep its benchmark interest rate at seven per cent.

The central bank also showed that growth in the M3 measure of money supply rose by 1.62 per cent in December compared with the same month in the previous year.

Previously, it had been announced that private sector demand for credit dropped 1.6 per cent year-on-year in November.

Salomi Odendaal, an economist at Citadel Investment Services in Cape Town, is quoted by Bloomberg as saying: "Given the depths of the recession, it will take time for credit to start going up again.

"If demand remains weak and inflation remains benign, there is a possibility of a rate cut."