Fresh credit contraction expected


It remains hard for the private sector to get new credit, and particularly households.

Although the Greek economy registered an improved growth rate in the first quarter of the year (2.3 percent on an annual basis), and despite the strengthening of confidence and the general improvement of conditions in the country, loan issues remain pegged to crisis period levels.

Bank officials estimate that this trend will continue for at least the rest of this year.

According to the latest available data from the Bank of Greece, the annual growth rate of the private sector’s total financing in April amounted to -1.9 percent, while the net flow of credit that month was negative by 1.167 billion euros.

Banks estimate that this year will be another one of credit contraction due to bad loan write-offs and the sale of nonperforming loans to third parties, as well as the creation of new NPLs.

Although the picture is expected to improve in the second half of the year, as the increase in households’ disposable income is set to have a favorable effect on loan demand, credit flow will remain negative for the entire year, or at best be marginally positive.