Household loans growth pose risk to financial stability

Topical issue

Household loans growth pose risk to financial stability

04. 12. 2018 13:00

The growth in household loans poses the greatest risk to the financial stability of Slovakia, the executive director of Slovak Central Bank's financial market oversight department Vladimír Dvořáček stated at a press conference on Monday. The volume of housing loans in Slovakia at the end of October increased by 10 percent year-on-year reaching €26.7 billion. Thus households still continue to see an excessive growth in loans, which remains the highest among all EU countries. "Similarly, Slovak household debts were recording the highest growth within the EU," added Dvořáček. An important factor at play is Slovakia's high rate of real estate ownership, one of the highest within the EU, which is unsustainable in the long-term, however. The sensitivity of households is also increased by the fact that households own the lowest amount of net financial assets in proportion to GDP within the EU, whereas another factor is the concentration of housing loans.

The previous period brought along a slight worsening of the global macro-economic outlook, according to Dvořáček. "The most pronounced source of uncertainty for the global economy is the risk of the onset of an across-the-board trade war," he claimed. The trends prevailing in the international environment, however, have had no impact on Slovakia's economy yet. In the first half of 2018, the economy was fuelled by significant investments and household consumption, later likely to be complemented also by foreign trade. "Hence, in the foreseeable future we can expect a continuation in the overheating of the domestic economy," concluded Dvořáček.

Anca Dragu, Photo: SITA

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