Demand for loans has increased

Business Lending Drives Credit Growth in Cyprus, While Household Demand Declines

According to data from the Central Bank of Cyprus, the volume of new loans in 2023 has increased, mainly driven by business lending. In contrast, household demand continues to fall due to the high interest rates set by the European Central Bank (ECB).

January–July 2023 results

• Total volume of new loans (excluding restructurings) rose to €2.035 billion, compared to €1.933 billion in 2022, surpassing the 2019 level of €1.990 billion.

• Business loans: up 22.6% to €1.255 billion (vs. €1.024 billion in 2022).

• Household loans: down 14.2% to €780 million (vs. €909 million in 2022), though still 2.1% higher than in 2019.

July 2023 data

• Total new lending amounted to only €19.2 million.

• Loans to households increased slightly by €0.7 million.

• Loans to non-financial corporations declined by €124.8 million.

• Other sectors recorded a decrease of €15.5 million.

Reasons behind the trends

• For businesses: the rise in borrowing reflects the need to cover operating expenses and build inventories amid elevated production costs.

• For households: high ECB interest rates and persistent inflation are discouraging families from taking new loans, especially mortgages.

Conclusion

The Cypriot financial sector is showing a divergent dynamic:

• Businesses are borrowing actively to sustain and expand their operations.

• Households remain cautious, reflecting the overall macroeconomic uncertainty in both Cyprus and the broader eurozone.