ECONOMY

Private sector borrowing slows down in March

Private sector borrowing grew at a slower pace in March but could pick up speed in the later half of the year as the Bank of Greece lifts credit ceilings on consumer loans. Corporate and household borrowing rose 17.2 percent in March, driven by a 31 percent increase in lending to individuals, statistics from the central bank released yesterday showed. The outstanding balance in the private sector stood at 89.36 million euros. «The pace of private sector credit growth is slowing down but is still robust and also higher than the 16.9 percent increase that averaged last year,» said Dimitrios Maroulis, economist at Alpha Bank. EFG Eurobank economist Platon Monokroussos said the deceleration is natural in view of the exceptionally strong growth seen in the last three years. Tumbling borrowing costs in the runup to Greece’s membership in the eurozone encouraged individuals and businesses to take on debt at a record pace. Credit expansion in the private sector was a robust 27.6 percent in 2000 against 24.8 percent in 2001. «The market is saturated. Lots of people borrowed heavily in the last few years,» said Monokroussos. He said the slowdown recorded in March could also be due to the uncertainties prior to the war in Iraq. The economists agreed that plans by the Bank of Greece to abolish credit ceilings, reportedly at the end of the month, could spur corporate and household lending. At present, individuals can only borrow up to 25,000 euros in consumer loans and a maximum of 3,000 euros in personal loans. Indicating that the housing market has yet to run out of steam, mortgage borrowing rose 32.4 percent in March, Bank of Greece statistics showed, against 34.4 percent the previous month. The outstanding balance totalled 22.37 billion euros. Consumer credit growth was a robust 26 percent, unchanged from February. Credit card borrowing posted the biggest increase at 34.6 percent, underlining the success of the banking sector’s aggressive marketing efforts. Despite the continued strength in private sector borrowing, Greece remains significantly underleveraged compared to the EU average. The Greek mortgage/GDP ratio is 13 percent versus the 45 percent EU average.