According to latest BoG data, credit contraction in the Greek market marginally decelerated to 3.9% y-o-y in February from 4.0% in the previous two months with balances reaching €225.0bn corresponding to 117.1% of GDP. Loan balances eased 0.2% m-o-m with net deductions significantly rising to €949m in February from €296m in January. February negative flow is almost equally attributed to household and corporate lending sectors, which recorded net deductions of €481m and €439m respectively.

Individuals & private non-profit institutions’ lending growth remained on negative ground, with balances reaching €105.0bn, down 0.4% m-o-m and 3.8% y-o-y (Jan: -3.7%). Monthly net deductions continued for thirty-fifth consecutive month increasing to €481m in February from €392m in January.

Housing loan balances contracted 0.3% m-o-m and 3.3% y-o-y (Jan: -3.2%) to €73.7bn. Deductions persisted for thirty-first month in a row rising to €271m in February from €229m in January.

Consumer credit slipped 0.7% m-o-m and 5.4% y-o-y (Jan: -5.1%) to €29.7bn. Monthly net deductions rose to €212m in February from €161m in January.

Corporate lending outstanding balances retreated 0.1% m-o-m and 4.3% y-o-y (Jan: -4.4%) to €106.4bn, Monthly net flow turned negative with net deductions at €439m in February from net additions of €96m in January.

Loans to sole proprietors stood at €13.6bn, down 0.2% m-o-m and 1.9% y-o-y (Jan: -2.4%). Monthly net flow remained at extremely low levels with marginal outflows of €29m in February from zero in January.

Lending constraints of Greek banks and tight liquidity conditions coupled with the prevailing recession and consumers’ reluctance to involve in any lending activity are the key reasons for negative credit expansion, on continued outflows in the household lending sector and negative – yet volatile – corporate lending flow. A deceleration of credit contraction and potential net additions may be evident after the completion of Greek banks recapitalisation.