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Demand for loans has increased

As it turned out, the country recorded an increase in the volume of new loans. Mainly due to interest from enterprises. However, many households are still holding back from taking out new loans due to repeated interest rate hikes by the European Central Bank (ECB) and general uncertainty about what awaits them in the future.

Thus, from January to July 2023, the total amount of new loans issued in Cyprus (excluding restructurings) increased to 2035 million euros from 1933 million euros in 2022, exceeding the level of 2019 (1990 million euros).

Interestingly, in the seven months of 2023, the volume of new business loans increased by 22.6% to EUR 1,255 million from EUR 1,024 million in the corresponding period last year. Compared to 2019, the growth was 2.4%. On the other hand, the volume of new loans to households during the same period fell by 14.2% to €780 million from €909 million in January-July 2022. However, compared to 2019, an increase of 2.1% was recorded.

As for July 2023, the total amount of new loans decreased to EUR 19.2 million.

At the same time, loans issued to households increased by 0.7 million euros, and loans to non-financial companies decreased by 124.8 million euros. Loans to the remaining local institutional sectors showed an overall decrease of EUR 15.5 million.

The Central Bank of Cyprus noted that maintaining new business loan figures at a high level reflects the increased needs of enterprises for financing to cover ongoing needs arising from high production costs and the need to build inventories. On the other hand, amid macroeconomic uncertainty, demand for loans from local residents continues to decline.

This development is a consequence of rising interest rates coupled with high inflation, which is forcing interested borrowers and banks to take a more cautious approach to new lending.