Private sector borrowing over 12 bln euros last year

Greek consumers accumulated 31.5 billion euros in debt last year as they took advantage of cheap housing loans and easy consumer credit to catch up with their eurozone brethren, statistics from the Bank of Greece yesterday showed. The private sector’s willingness to borrow helped sustain the credit boom, with credit to enterprises and households growing 16.9 percent to 12.48 billion euros, offsetting the government’s belt-tightening. Private sector credit growth last year, however, was slower than the 24.8 percent recorded in 2001. Platon Monokroussos of EFG Eurobank said private credit expansion had been expected to moderate after two years of high growth. «It’s logical to see a slowdown as the market is saturated after the elevated levels of 2000 and 2001,» he said. «Nevertheless, the trend is expected to remain strong, with growth in double digits.» Monokroussos said consumers and businesses could be less willing to take on more debt in the first quarter of the year in view of the growing geopolitical and economic uncertainties. However, he expects a blip in February credit expansion as consumers react to Alpha Bank’s unanticipated interest rate hike, which came into effect last week. «This could propel consumers to take out loans before other banks jack up their rates, too,» he said. Greater provisioning for bad loans ordered by the Bank of Greece is another factor seen as inhibiting credit growth this year. The central bank recently implemented stricter provisioning requirements in consumer and mortgage lending in a move analysts said is intended to keep inflation down. The value of mortgage and consumer credit debt outstanding increased by 32.2 percent last year, down from 40.4 percent in 2001. Reacting to falling interest rates, Greeks took out mortgage loans to the value of 21.2 billion euros last year, an increase of 35.6 percent compared with 38.9 percent in 2001. Consumer credit borrowing rose 24.2 percent to 9.75 billion euros, underlining the willingness of consumers to borrow for car and white goods purchases. The growth rate, however, was down sharply from the 42.5 percent posted in 2001. The credit boom notwithstanding, Greece is still one of the most under-leveraged markets in the EU. The mortgage-to-GDP ratio is estimated at 13 percent against an EU average of 45 percent, while the consumer lending / GDP ratio stands at around 7 percent against the region’s 11 percent. Total private sector credit growth at around 20 percent of GDP is less than half of the eurozone’s 50 percent. «There is still a catching-up process for Greeks in terms of living standards,» Monokroussos said, predicting steady credit growth ahead.