ECONOMY

Consumer credit growth slows down slightly, BoG says

Greek households are slowing down on their rising indebtedness, according to data published yesterday by the Bank of Greece. In May 2003, new credit to households increased 29.6 percent from May 2002, when it was running at an annual pace of 38.2 percent. This decline in pace is a sign that households, which began having access to cheap loans in 1999-2000, when interest rates fell low enough, are reaching a point of saturation. The great expansion of credit, the result of lower rates and the adoption of the euro, was a great support for the Greek economy in the difficult times it went through after the decline of the Athens stock market, which started in autumn 1999, and the slowdown of the global economy since 2001. Supporting domestic demand with consumer loans was extremely valuable for the Greek economy; along with European Union funds and the construction of Olympics-related projects, it allowed the Greek economy to expand fast. The contribution of loans to the growth of the gross domestic product (GDP) was valuable, as well as their action as an antidote to the gloomy sentiment among investors after the steep drop in the ASE index. Bank of Greece data show that total outstanding loans to households were valued at 34.4 billion euros at the end of May. Of these, 23.2 billion were in mortgages, 10.4 billion in consumer loans and 831.7 million represented other types of loans. Mortgage loans were increasing at a 30.8 percent annual pace at the end of May, down from 39 percent a year ago, while consumer loans were rising at a 22.6 percent pace as against 34.6 percent at end-May 2002. We should note that the Bank of Greece has abolished limits on consumer loans since July 20. An analysis of consumer loans shows the following: Loans through credit cards were increasing at end-May 2003 at a 31.7 percent pace from 50.8 percent in May 2002. Consumer loans with supporting documents actually declined 14.4 percent in the year ending in May 2003, whereas in the previous year they had risen 32.2 percent. Finally, personal loans rose 40.7 percent from 13.7 percent the previous year, the only category of household credit where an acceleration is taking place. In contrast, enterprise loans have accelerated slightly, rising 12.9 percent in the year ending in May 2003 as against 12.1 percent in the previous years. Total outstanding loans to enterprises stood at 58.04 billion euros at end-May.