ECONOMY

Robust demand for loans

Bank borrowing by the private sector accelerated 17.9 percent year-on-year in April as businesses and households took advantage of low interest rates to add on more debt. The outstanding balance borrowed by the private sector came to 90.77 billion euros, data released by the Bank of Greece yesterday showed. The pace of private sector credit growth in May was higher than the 17.2 percent rise recorded in the previous month, driven by a 11.9 percent jump in corporate borrowing and the sustained robust pace in household borrowing. There is still room for growth, said EFG Eurobank economist Platon Monokroussos. «At 4 percent, overall total credit expansion in May was low, due principally to the decline in government borrowing. A breakdown of the sectors showed household credit expansion continuing to grow at a strong pace,» he said. The market appeared to be stabilizing after last year’s more rapid credit slowdown, said Monokroussos, citing the slight deceleration in household borrowing to 29.8 percent from 31 percent in March. Mortgage lending, fueled by low interest rates and Greeks’ preference for acquiring their own homes, grew 31 percent in May, down from 32.4 percent in the preceding month. Consumer credit also showed signs of fatigue after a long boom, growing 24.6 percent in April compared with 26 percent previously. Credit card borrowing increased 33.5 percent, down from 34.6 percent. Private sector borrowing is expected to remain at current high levels in the coming months as Greece continues the catch-up process with the rest of the EU. «Business and household leverage is still low, about half of the EU average,» said Monokroussos. Growth is also expected to be driven by the Bank of Greece’s decision to do away with credit caps on consumer and personal loans, effective June 20. With the European Central Bank expected to trim interest rates in the second half of the year, private sector borrowing could pick up speed in the coming months although at a more modest pace than that seen in previous years.