Given the pre-crisis context, marked with rising capital inflows, falling interest rates and strong confidence, household debt started to increase. By the beginning of the crisis, it reached around 30% of GDP, with very strong growth observed in the Baltics (reaching close to 50% of GDP). As the crisis occurred, the household debt adjusted as well, but the adjustment was mild, declining by only 5 p.p. of GDP after the crisis. It even continued to increase in some countries Slovakia, the Czech Republic, Poland and North Macedonia – facilitated by loose financial conditions with the overall perception for this segment being more diversified, with less of a risk and higher quality profile of the overall portfolio. Bank credit extended to households generally grew faster than corporate credit in most CESEE countries post-crisis. Broken down by purpose, there is a growth in housing loans, but  7  consumer loans have also expanded extensively in most of the CESEE countries. Strong growth in consumer credit warrants close vigilance by authorities, given the risks associated to consumer credit as typically unsecured loans with shorter maturity that increases the exposure to credit risk. Some countries implemented macro-prudential measures to curb consumer credit growth and mitigate potential risks from fast rising households’ credit to financial stability.
2019  2016  2017  2014  2015  2012  2013  2010  2011  2008  2009  2006  2007  2004  2005  2002  2003  0.0 -1.0  2009-2014  Food and energy prices, average (contribution to inflation, in p.p.) Inflation, average consumer prices (change in %)  Source: Eurostat and National Statistics. The contribution of the monetary policy relevant inflation rate – core inflation to the overall inflation in the countries in the region has gained weight in the last couple of years. Still, the overall dynamics of the core inflation remains soft, with average growth at around 1%, very close to the growth in the euro area. Given the fundamental relation between the demand and the dynamics of the core inflation, the first area to be scrutinized is the dynamics of the output gap, which can provide for information on the cyclical position of the economy. The pre–crisis data reveal strong positive output gap, which in 2005-2008 averaged around 5% of the potential GDP. The economies in the region went under strong economic adjustment, as the crisis emerged and their growth was undershooting the potential, leading to negative output gap for much of the post–crisis period except for the past three years. Apparently, despite the post-crisis economic recovery, the momentum gained was not strong enough to lift the output gap away from the negative territory.