The indebtedness of Czech residents witnessed a significant uptick in 2023, soaring by 5.1% to reach a staggering 3.31 trillion korunas. Data sourced from the CRIF – Czech Credit Bureau’s banking and non-banking client information register also reveals a concerning 6.2% increase in the volume of debt susceptible to non-repayment, totaling 29.5 billion korunas.

Housing loans, a prominent component of overall debt, experienced a more modest growth rate of 4.4%, amounting to 2.73 trillion korunas. This expansion, although substantial, marks a slowdown compared to previous years, notably the 17% surge recorded at the end of 2021. Despite the slight resurgence observed in the mortgage market towards the end of last year, the long-term trend indicates a decline in the number of clients acquiring housing loans, coupled with a rise in the average loan amount per client. This trend is primarily attributed to escalating real estate prices, with a noticeable decrease in younger individuals opting for housing loans.

Short-term debt also witnessed a notable increase, reaching 579.4 billion korunas by the close of 2023, reflecting an 8.9% year-on-year rise. Furthermore, the volume of debt for consumption surged across all regions, with Prague experiencing the most rapid growth at 10.7%, totaling 65.4 billion korunas.

Despite the overall expansion in debt, concerns loom over non-repayment, evidenced by the substantial volumes of unpaid housing loans and short-term loans. Unpaid housing loans stood at 4.4 billion korunas by the end of 2023, while the volume of unpaid short-term loans surged by 9.5% annually, reaching 25 billion korunas. Additionally, the number of individuals encountering repayment challenges surged by 1.1% to 174,000 people, highlighting the mounting financial strain faced by a significant portion of the population.

As the specter of non-repayment looms large, financial institutions and policymakers are urged to adopt measures aimed at promoting responsible borrowing practices and enhancing financial literacy to mitigate the risks associated with burgeoning debt levels. Additionally, efforts to address underlying economic factors driving debt accumulation and repayment challenges are imperative to safeguard the financial well-being of Czech residents.

Article by Prague Forum