Against the background of business pessimism, the growth rates of  retail lending in the banking system of Armenia are still  significantly higher than the growth rates of corporate

ArmInfo. In the banking system of Armenia, the growth rates of retail lending are still  significantly higher than the growth rates of corporate.  According  to the Financial Rating of Banks of Armenia, prepared by the ArmInfo  Investment Company, credit growth of individuals accelerated in 2018  from 16.7% to 31.5%, and the lending dynamics of legal entities came  out of minus 1% to ascending 8.8%.

Two years earlier, in 2016, the picture was reversed: amid a decline  in retail lending by 1.3%, there was an increase in corporate by  26.3%.  As a result, the share of corporate loans in the total loan   portfolio of the banking system continued to decline - in 2018 from  66.9% to 63.6% (against 71.3% in 2016), reaching 2.1 trillion drams  ($ 4.3 billion), in parallel with which the weight of retail credit  increased even more from 28.9% to 33.8% (against 27.6% in 2016),  reaching 1.1 trillion drams ($ 2.3 billion).

According to analysts of AmRating rating agency affiliated with  ArmInfo, activity in the structure of the loan portfolio in terms of  retail was observed against the background of a slowdown in consumer  prices growth from 2.6% in 2017 to 1.8% in 2018, provoked mainly by  lower than in 2017 (5.3%), the rise in price of food products - by  3.2%, clothing and footwear - by 0.9%, alcohol and cigarettes - by  3.9%, gasoline and diesel fuel - by an average of 13.3  % (vs. 18.5%  in 2017).  Moreover, the growth trend in consumer spending was  accompanied by a slowdown in the growth of private transfers - up to  1.7% in 2018 from 14.6% in 2017, the volume of which amounted to $  1.786 billion.

It is noteworthy that in the period under review there was a more  significant reduction in interest rates on retail loans than on  corporate loans.  In particular, the rates on dram consumer loans  decreased in 2018 from 14.9% to 13.6%, and on dollar loans from 12%  to 11.8%, i.e.  on average, rates for those and other fell from 13.5%  to 12.7%.  For mortgage loans of individuals, rates dropped from  10.6% to 10.5%: for dram loans - from 11.2% to 11.1%, and for dollar  loans - remained at the level of 9.9%.  At the same time, the rates  on corporate loans in 2018 increased from an average of 9.4% to 9.7%,  which was provoked by the rise in price of dram loans from 10.7% to  11.3%, while dollar prices dropped from 8, 2 to 8%.

Thus, according to independent analysts, the growth of consumer  optimism in Armenia, outlined already in 2017, continued to  accelerate in 2018 more rapidly.  And it is not excluded that the  amnesty of fines / penalties for bad loans, which implies refinancing  of problem loans, mainly referring to consumer loans, served as an  additional incentive.  Regarding the corporate clientele, the banking  system, against the background of a slowdown in GDP growth to 5.2% in  2018 from 7.5% in 2017, in fact, retained extremely conservative  positions, which indicates a business pessimism atmosphere that  dominates the country so far.