Few markets can match central and eastern Europe (CEE) for the speed of growth in consumer finance. The resources boom in Russia helped fuel domestic credit growth of more than 50% in the country in 2007, according to estimates by rating agency Standard & Poor’s (S&P), while the convergence in living standards among new and aspiring EU entrants is driving similar rates of credit growth. There is only one problem – banks can hardly keep up with demand.
Indeed, financial sector ownership in the new EU states is often concentrated in the hands of a few large foreign players, who are themselves subject to the global squeeze in credit conditions. This pressure, combined with fears of economic overheating and property market bubbles, has provoked some foreign banks to pull on the leash. S&P is forecasting credit growth to fall sharply in 2008 – and more than halve in the Baltic states. Even in Russia, tighter conditions for local banks mean credit growth is forecast to slow to 30% this year, despite continued high energy prices.
