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Slovakia still among countries with fastest growing loans

The central bank is preparing stricter rules for the provision of loans.

Illustrative stock photo(Source: SME)

Slovakia remains among the countries with the fastest growing indebtedness for both the household and corporate sectors. The National Bank of Slovakia (NBS) wrote about this in its regular commentary on the macro-prudential policy for the first quarter of 2018.

In the eurozone and the entire European Union, loans that were provided to the private, non-financial sector grew by 1.3 percent (each) in the first quarter of this year. However, these same loans grew by as much as 9.2 percent in Slovakia. The growth of indebtedness in central and eastern European countries achieved 5.3 percent.

“Year-on-year increases in the volume of provided loans keep attacking their all-time highs,” warns the central bank, as cited by the TASR newswire. It ascribes this hunger for loans chiefly to low interest rates, favourable labour market development, growth in household incomes and revenues, as well as competitiveness on the credit market and development on the real estate market.

Indebtedness of the private non-financial sector measured by the provided loans/GDP ratio amounted to 59.8 percent.

“Slovakia thus reached the second highest position from the central and eastern European countries in terms of indebtedness, while 10 years ago, it belonged to the region’s least indebted countries,” NBS writes.

The volume of household loans reached 11.3 percent y-o-y in the first quarter of this year. Both housing and consumer loans grew at a two-digit pace. However, their growth rate has slightly decelerated since last summer.

The 1Q volume of corporate loans rose 5.5 percent y-o-y. Although their growth rate has visibly slowed since last year in this segment, the growth still significantly exceeds the EU average, stressed the NBS.

Terms for the provision of loans were significantly toughened as of July 1, 2018 in Slovakia. This is because 100-percent mortgages have been cancelled, while a new limit has been introduced for the total indebtedness/consumer’s income ratio. However, these are not necessarily the last changes to be adopted by the NBS, as the central bank is considering making further changes in loan provision regulation.

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