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Household and Non-Financial Corporations Indebtedness Report, September 2016

Friday, 21 October 2016

The Central Bank of Cyprus has today released the Household and Non-Financial Corporations Indebtedness Report for September 2016.

The Report presents a concise analysis of the level of indebtedness and the financial position of the two main groups of borrowers – domestic households and non-financial corporations (NFCs).

Based on the results of the Report for September 2016, domestic households and NFCs continue to be highly indebted, although the latest data indicate that debt levels have started decreasing, with total private non-financial sector debt reaching 354,2% of GDP as at the end of March 2016. Nevertheless, household and NFC debt ratios remained fairly stable, falling slightly to 127,3% and 226,9% of GDP, respectively, at the end of March 2016 compared with the previous year. Bank credit to the domestic private sector decreased to 243,1% of GDP at end-March 2016 compared with 252,0% a year earlier.

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, indicating that prices may be bottoming out owing to renewed domestic and foreign demand, encouraged by the reduction in lending rates. Based on consolidated prudential data, in absolute terms, non-performing loans decreased between March and June 2016 by € 1,1 billion, reaching € 27,7 billion. The ratio of non-performing loans as a percentage of total loans stood at 49,4% in June 2016, up from 48,5% in March 2016. However, the increase in the ratio relates to the larger decrease in total loans, which more than outweighed the reduction in non-performing loans.

Moreover, the country’s return to modest economic growth since the beginning of 2015 has helped the banks’ efforts in restructuring loans and providing credit to the real economy.

The publication is available in English and Greek.