Loan demand in Cyprus increases in Q3 2018

The net demand for loans in Cyprus, both by enterprises and households, increased in the third quarter of 2018, while loan criteria for all categories remained unchanged.

According to the Bank Lending Survey published Friday by the Central Bank of Cyprus (CBC), the increase in demand for loans was mainly due to continued growth in economic activity, the slight wage growth and to historical low domestic lending rates.

An increase in net demand for all loan categories was also recorded in the euro area.

According to the expectations of the banks, both in Cyprus and in the euro area, net demand for loans is expected to increase further for all loan categories in the fourth quarter of 2018.

According to CBC, expectations for a further increase in the net demand for new loans from households and enterprises, suggest a positive indication for the continued strong economic growth of the Cypriot economy for the next quarter as well.

In the third quarter of 2018, banks criteria for lending to businesses and households in Cyprus remained unchanged from the previous quarter. On the contrary, the corresponding lending criteria for housing in the euro area became more lenient, while for consumer and other purposes they remained unchanged.

It is noted that lending criteria in Cyprus have been tightened since the first quarter of 2011 up to the fourth quarter of 2014, and remain unchanged since the first quarter of 2015.

According to the expectations of banks for the fourth quarter of 2018, their lending criteria in Cyprus to all categories are expected to remain unchanged. In the euro area, lending criteria to enterprises are expected to remain unchanged, while household lending criteria are expected to become more lenient.

As regards to loans to enterprises, restructurings don’t affect demand growth as in previous quarters, indicating that the growing demand may now involve new loans channelled into productive purposes.

This is not the case as regards to the increase in demand for housing loans, where debt restructuring and renegotiation of loans, as well as reduced domestic savings funding also had a positive effect on rising demand.

Net demand for consumer and other loans by households in Cyprus recorded an increase in the third quarter of 2018, to a slightly higher extent than expected by the banks. It is however pointed out, the slowdown in growth since the beginning of 2018.

Source: Cyprus News Agency