Loans and advances to the private sector rose to a four-month high in December, but were well below the same month in 2019, with weak demand expected to continue in early 2021 as SA's economy battles to recover from Covid-19.

Private-sector credit extension growth moderated to an average of 4.9% year on year in 2020 from 6.8% in 2019, data from the Reserve Bank showed on Friday.

It rose to 3.6% year on year in December from 3.4% in November, but was well below the 6.1% growth registered in 2019.

Credit demand remains weak, reflecting the tough economic conditions faced by both households and companies, said Nedbank Group Economic Unit economists Nicky Weimar and Johannes Khosa in a note.

“Little reprieve is likely over the very short-term as the resurgence in Covid-19 infections has forced the country to return to level 3 lockdown, which will inflict further pain on those sectors worst affected by the previous rounds of restrictions,” the economists said.

Credit demand is likely to gradually improve as 2021 unfolds, the economists said, supported by low interest rates and a likely normalisation of activity as vaccines roll out.

“However, It will take longer to repair the damage inflicted to household incomes and company profits,” Nedbank said.



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