Household and Non-Financial Corporations Indebtedness Report, May 2016

Wednesday, 6 July 2016

The Central Bank of Cyprus has today released, for the first time, the publication Household and Non-Financial Corporations Indebtedness Report for May 2016.

The Report presents a concise analysis of the level of indebtedness and the financial position of the main borrowers of the Cyprus banking system – the domestic household and non-financial corporations sectors.

Based on the results of the Report for May 2016, domestic households and non-financial corporations (NFCs) continue to be highly indebted, with the total debt reaching 358,1% of the Gross Domestic Product (GDP) as at the end of September 2015. Nevertheless, household and NFC debt ratios remained fairly stable, falling slightly to 127,7% and 230,4% of GDP, respectively, at the end of September 2015 compared to the previous year. Bank credit to the domestic private sector decreased to 249,9% of GDP at end-September 2015 compared to 258,7% a year earlier.

Households’ and NFCs’ debt-servicing capacity continues to be weak, as reflected in the high aggregate (household and NFC) debt service ratio and in the level of non-performing bank loans, especially in the case of loans to the broader real estate sector to which banks are highly exposed.

The Report also presents the financial position of households and NFCs, as well as data on property prices. As far as property is concerned, prices continued their downward trend, however the pace of decline is lessening, possibly showing that prices are bottoming out, given emerging signs of renewed domestic and foreign demand, assisted by the reduction in lending rates. Furthermore, the progress in the restructuring of non-performing loans by banks is presented, along with an analysis of NPLs per sector.

Αlthough debt levels remain high, latest data indicate that these are beginning to stabilise. Non-performing loans have reached their peak in February 2015 in absolute terms and have been decreasing ever since, and a stabilisation in households’ and NFCs’ financial position can be observed.

The publication is available in English and Greek.