The Distribution and Dispersion of Debt Burden Ratios Among Households in Poland and its Implications for Financial Stability

The recent acceleration of credit growth in Poland has raised the question whether the loan growth rate in Poland was excessive or not. The main source of growth in the lending of banks in Poland are loans to households. Most of recent international surveys of this phenomenon conclude with excluding Poland from the group of countries with excessive credit growth (Boissay, Calvo-Gonzalez and Koźluk, 2005; Kiss, Nagy and Vonnak, 2006). However, the results on most of these surveys are based on the analysis of the growth of total credit. In this context, it is worth comparing the situation in Poland to that of some other EU countries. During periods of rapid growth in lending in Portugal, Ireland and Greece, the loan-to-GDP ratio doubled in around eight years.3 This had no adverse effects such as any significant macroeconomic imbalance or a sizeable increase in inflation. In order for the loan-to-GDP ratio in Poland to double within eight years (i.e. from 26.5% in December 2005 to 53% in December 2013), the overall loan portfolio would have to grow by 16.8% each year in nominal terms (assuming GDP growth in line with the projection – at 4.5%, and inflation in line with the MPC target – at 2.5%). In 2005, the overall loan amount grew by 13.1%. Although this growth rate is higher than the average lending growth in 2003-2005 (7.7%), it remains lower than the growth dynamics observed in the aforementioned countries. Assessment of the impact of such lending growth rate on financial system stability depends on both macroeconomic and institutional conditions in which the growth takes place and distribution of the debt among different income groups of households