ECONOMY

Credit expansion slows further

Credit expansion to Greek households and businesses slowed in March to an annual pace of 10.8 percent from 12.8 percent in the previous month, with loan growth to the construction sector showing the steepest drop, according to central bank figures. A sharp slowdown in economic activity and tighter credit conditions are eating into the loan growth that fueled consumption and economic expansion in Greece and boosted bank earnings. Greece’s economy, which accounts for about 2.5 percent of that of the eurozone, may slip into recession in 2009 after years of 4 percent growth, the central bank has said. The Bank of Greece said loans to households and businesses at the end of March stood at 249.9 billion euros, up 10.8 percent from the same period a year earlier. Greek authorities want the pace of credit expansion to stay above 10 percent this year and have come up with a 28-billion-euro bank support package to keep the economy adequately funded. The Economy and Finance Ministry has forecast that the economy will keep growing this year by a pace of around 1 percent despite the international slowdown. Lending to businesses reached 132.6 billion euros, showing an annual growth rate of 12.2 percent, down from 15.2 percent in February. The biggest drop in borrowing expansion rates was in the construction sector, where loans grew at an annual clip of 17.4 percent in March, to 11.2 billion euros, versus 25.2 percent in February. Earlier this week, the government announced a series of measures in a bid to breathe life into the building industry where investment activity has fallen off sharply in recent months. Measures include subsidizing mortgages and increasing tax incentives for property buyers. Household loan balances in March grew by 127 million euros, or 9.2 percent, to 117.3 billion euros. Mortgages grew by a slower 8.7 percent annual pace or 199 million euros from 9.6 percent in February.