Czech household debt low, room for growth-cbanker

...(CNB) Vice-Governor Miroslav Singer said on Friday.

"The room for loan growth is probably higher than we realise," Singer, one of the seven CNB rate-setters, told a business conference.

"Generally speaking, households are not overindebted ... households are a part of the economy with relatively low debt," he added, saying household debt as a share of gross domestic product was 20-30 percentage points below eurozone levels.

The low level of domestic credit costs, which are a record 125 basis point below the euro zone equivalents, has spurred a boom in mortgage lending as rising incomes have made buying their own flat or house affordable for a growing number of Czechs.

Credit extended to households to finance their consumer purchases has also expanded quickly, helping spur growth in retail sales to a record high this year.

The policy rate has held flat at 2.50 percent following increases totalling 75 basis points between October 2005 and September 2006.

Some economists have warned that the low interest rate level has fuelled bubbles in the housing market and called for an early, pre-emptive interest rate increase to help sustain healthy economic growth and maintain central bank credibility.

Most CNB watchers predict policymakers will raise the main rate by 25 basis point rate to a more than 4 year high at their meeting on May 31 to respond to a pick-up in inflation to a 7-month high of 2.5 percent in April and buoyant consumption.

[PRAGUE/Reuters/Finance.cz]