Tuesday, July 1, 2008

Credit to private sector expands 24.4% y/y at end-May.

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Credit to private sector expands 24.4% y/y at end-May. The credit to the private sector expanded by 24.4% y/y to CZK 1.735tn (EUR 69.2bn) at end-May, thus slowing down from 24.7% y/y growth a month ago, the central bank statistical data shows. The businesses continued to borrow more than save, but the pace of the credit growth directed to corporate sector at 19.6% y/y, was much lower than that to households, the credit to which expanded by 30.7% y/y – the growth rate reported for loans for households gradually slowed down following the interest rates hike. The households’ indebtedness reached CZK 784bn as of end-May and for fourth month in a row they were net borrowers with CZK 31.3bn, up by 67.4% m/m. Robust pace of credit expansion, especially of credit to households, taken together with eventual tightening of credit conditions because of international developments and the present financial crisis, still with relatively limited effects in the country, might find expression in growing risks for liquidity problems linked to growing probability for difficulties for households to return their debts. This risk might become even higher if the domestic economic activity slows down significantly and unemployment rises. The net credit to the government dropped by 84.8% y/y in May, with the drop increasing by 4.3pps in a month. The money supply measured by M2 monetary aggregate increased by 8% y/y to CZK 2.495tn at end-May.

FX poll 2008:

Selling short

Credit to private sector expands 24.4% y/y at end-May.

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