|
Report says relentless rise in
personal lending unsustainable
by David Kelleher
The relentless rise in personal lending from banks is a cause
of concern according to a report on Bank of Valletta carried
out by a local stockbroking firm.
The report by Curmi and Mallia says that the present personal
lending figures are too high and the situation is no longer
sustainable.
That the Maltese are living beyond their means was confirmed
by the governor of the central bank, Mr Michael C. Bonello last
week, who added that the Maltese had a tendency to do business
with other people’s money.
In fact, the increase in loans from the local banks has also
gone up over the past two years. In the report the authors found
that loans and advances to customers had gone up by 14 per cent.
“Persistently high lending growth is being witnessed for
the tourism, personal consumer and mortgage sectors. The declining
trend in the manufacturing sector has been halted and a 20 per
cent increase has been reported this year,” the report
says.
The increase in lending from local banks is evidenced from the
number of new retails outlets and projects that are mushrooming
all over the island. It is, in fact, this entreprenurial activity,
that led the CBM governor to state that there is over-investment
in the country.
The Curmi and Mallia report lists as a major concern the relentless
rise in personal lending – gross national savings fell
to19 per cent in 1999 from 27 per cent a decade before. The
report says that the BOV chairman is more inclined to believe
that exports are driving economic growth and that the consumer
is more inclined to invest his money than spend it.
The report however contradicts this view.
“The bank’s figures do not support this view since
personal lending shows the highest growth rate over a two-year
period (57 per cent). It represents 22 per cent of total bank
lending,” it says, adding, “the number of vehicles
on the island and the continuous proliferation of retail outlets
and shopping plaza attest to the consumeristic trends that have
engulfed the Maltese population.
“The banks have seized this opportunity and most of their
advertising campaigns are aimed towards the consumer and mortgage
borrowing customers. The situation is definitely unsustainable,”
the Curmi and Mallia report says.
The culture of saving and investment, it concludes, has to be
rekindled in the population due to the demographic time bomb
which Malta is facing.
The report also says that the biggest hurdle for corporate Malta
is European Union membership. As protective levies are removed
on EU imported products by 2003, major restructuring in a number
of sectors wil be inevitable.
The newly liberalised environment, already
being experienced by the banking and telecommunications sector,
will claim some victims, the report adds, while others will
need substantial bank financing to prepare themselves to operate
in an unprotected environment.
|
