With Greece experiencing the first domestic recession since the early 1990s and with a rather subdued private sector credit expansion and a public sector trying to address chronic fiscal imbalances, the medium-term outlook regarding asset quality is challenging.
A further decline in loan quality and increases in impairment charges are likely both domestically and abroad; economic conditions in SEE have improved but significant challenges still remain, observed and expected increases in unemployment being a key concern. Additionally, a high percentage of loans in SEE is FX-denominated and unhedged from the borrowers, which should further strain the balance sheets of households and corporates.