South Africa Credit Growth Accelerates to Four-Year High

South African credit growth accelerated to a four-year high in December as the lowest borrowing costs in more than 30 years fueled demand for loans.

Borrowing by households and companies rose 10.1 percent from 9.6 percent in November, the Pretoria-based Reserve Bank said on its website today. The median estimate of 15 economists surveyed by Bloomberg was 9.7 percent.

“Low interest rates are still supporting credit,” Thabi Leoka, head of macro research at Standard Bank Group Ltd., said in a phone interview from Johannesburg. “Credit uptake in households could slow, and that’s because of the headwinds that households are likely to face this year and job losses that will impact on the ability to take on loans.”

Policy makers have kept the benchmark lending rate at 5 percent since a surprise rate cut in July. The rand’s depreciation to a four-year low against the dollar is boosting food and fuel prices, limiting the room policy makers have to reduce rates further.

The rand pared its loss after the data was released and was 0.2 percent stronger at 9.0115 a dollar at 9:35 a.m. in Johannesburg. The yield on the rand debt due in 2021 rose 3 basis points to 6.61 percent.

The Reserve Bank last week cut its economic growth forecast for this year to 2.6 percent from 2.9 percent and raised its estimate for average inflation to 5.8 percent from 5.5 percent. The unemployment rate rose to 25.5 percent in the third quarter.

The broad M3 measure of money supply rose 5.2 percent in December from a year earlier compared with 6.3 percent in November, the central bank said. The median estimate in a Bloomberg survey was 6.2 percent.

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