Cyprus’ financially fragile households will find it ever harder to repay loans following the European Central Bank’s recent increased interest rates.
Afterall, they are already struggling enough with the significantly higher cost of living straining their finances, according to the European Commission’s Post-Programme Surveillance Report Economic and Financial Affairs Cyprus, Autumn 2022.
The recently-released report summarises the main findings from the latest mission for Cyprus which took place from September 26 to 28.
However, the Commission technocrats’ concern about loan repayment is mitigated by the fact that low-income households have less debt.
Even though loan risks in the island’s business sector are more difficult to quantify since their payback ability depends to a large extent on anticipated economic slowdown.
The report also noted that due to the pandemic, banks in Cyprus have moved loans into the higher risk category, especially corporate sector loans.
And that non-financial corporation (NFC) loans were most affected.