ECONOMY

Loan growth drops off under weight of crisis

Greece’s credit expansion, which helped support the country’s strong economic growth in recent years, decelerated sharply in December under the weight of the global downturn, according to data released yesterday. The Bank of Greece, the country’s central bank, said lending to businesses and households slowed in December to an annual pace of 16.4 percent from 18.2 percent in the previous month. The figure stood at 21.5 percent in December last year. «From the analysis of funding to businesses in each sector, it can be seen that there was a slowdown in all fields apart from agriculture,» the bank said. The sector with the largest drop-off was shipping, which accounts for 7 percent of the country’s annual gross domestic product (GDP). Loan growth to the sector decelerated to 16.7 percent in December from 25.1 percent in November. Greece’s shipping industry, which accounts for one-fifth of the world’s fleet, has been a key contributor to export revenue but is also highly exposed to the global downturn. As for household lending, the pace of mortgages issued fell to 11.4 percent in December versus 21.9 percent in the same month of 2007. According to the central bank, the private sector owed 249.6 billion euros, or about 103 percent of GDP, at the end of 2008. In a bid to help ensure the economy is adequately funded, the government is running a 28-billion-euro program to provide lenders with a liquidity and capital boost. Banks participating in the program claim to have started pumping state money into the economy, despite complaints from consumers and businesses of asphyxiating credit conditions. Piraeus Bank, Greece’s fourth-largest lender, and the Athens Chamber of Commerce yesterday announced a 1-billion-euro program to help finance the chamber’s 100,000 members starting next month. Recipients will qualify for special benefits, such as a lower interest rate and putting off repayments for the first year. The Greek economy is expected to grow just 0.2 percent this year compared with an average 4 percent over the past five years, according to the European Commission. [email protected]