Loans stagnating throughout most of the region

In 2013, the dynamics of loans to non-financial corporations was either anaemic or negative in most of the countries in the region, with the exception of Turkey and the CIS countries.

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THE VIENNA INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES (WIIW)


OLGA PINDYUK

OLGA PINDYUK

DIPLOMAT ECONOMIST at THE VIENNA INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES (WIIW)

Latvia, Slovenia and Croatia performed worst; their loans stocks fell on average by 7% to 8% year-on-year over the period December 2012 to November 2013. At the end of November 2013, loans to non-financial corporations in nine of the twenty countries analysed displayed negative growth in year-on-year terms. During 2013, loan dynamics in Serbia, Romania,  Bulgaria, and Slovenia decelerated significantly, whereas Croatia and Hungary registered an improvement in the performance of loans to nonfinancial corporations. In November 2013, year-on-year growth rates of loan stocks in Serbia, Romania,  Bulgaria, and Slovenia fell by 20 p.p., 9 p.p., 5 p.p., and 3 p.p. respectively compared to December 2012. In Croatia and Hungary, they increased by 8 p.p. and 12 p.p., respectively.

 

In most countries in the region household loans have on average grown more rapidly or decreased more slowly than  corporate loans – with the exception of Latvia, Albania, Ukraine, Croatia, and Poland. Over the period December 2012 to November 2013 the most dramatic decline in the stock of household loans occurred in Latvia and Hungary; on average, they slumped by 9 % and 6% year-on-year, respectively. Russia, Serbia, Romania, Slovenia, Albania and Croatia recorded a deceleration of growth or acceleration of decline. Kazakhstan and Turkey registered double-digit growth rates throughout the same period, in addition to the growth of household loans picking up speed in both countries.

 

 

Countries with lower levels of private debt tend to have their loans stock growing at higher rates. As can be seen from Figure 1 this holds especially true for household loans. Over the period December 2012 – November 2013 the coefficient of correlation between the share of private debt in GDP in 2012 and average year-on-year growth rate of loan stocks was -0.7. As for loans to nonfinancial corporations, the coefficient of correlation was also negative, albeit much lower (-0.3). The share of private household debt in GDP is significantly lower than that of corporate debt, as a result of which banks currently consider the household loan market to be much safer than the corporate loan market. Turkey and the three CIS countries display one of the lowest levels of private debt in the region, while Serbia, Albania, Bosnia and Herzegovina, and Slovenia lead the region in terms of the share of non-financial corporate debt in GDP (in Serbia the indicator exceeds 100%). Private household debt as a share of GDP was highest in Romania and Slovenia – but even there it only stood at around 40% of GDP in 2012.

 

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