The credit squeeze spared the financial sector in Central and Eastern Europe and did not hinder its record growth in 2007, but now the region will go back to modest and sustainable growth, Raiffeisen Zentralbank Osterreich and Raiffeisen Centrobank has said in its annual regional banking report.

In 2007 the region's combined banking assets gained 31 per cent year-on-year, or 333 billion euro, the biggest growth on record. Assets totalled 1.42 trillion euro at the end of 2007.

The assets surged 20 per cent year-on-year in the first half of 2008 and analysts see the pace slowing down to 15 per cent in 2008/13, from 26 per cent for 2003/08.

In spite of the slower development levels, the CEE banking sector continued to be very dynamic, and the outlook for the coming years were very good, Walter Demel, senior analyst at Raiffeisen Zentralbank Osterreich, said.

The fast-growing economies in the region had sped up lending by a record 42 per year-on-year, with South-Eastern Europe and the Commonwealth of Independent States outperforming Central Europe.

Eastern Europe is far behind the eurozone's average in terms of economic development and so the loan expansion will continue, analysts have said.

CEE banks had little exposure in financial instruments that triggered the credit crunch but still they were tightening loan requirements and raising interest rates to meet the soaring cost of interbank lending.

Raiffeisen forecast loan volumes will expand by 1.25 trillion over 2008/13, but deposits will grow only by 950 million euro, which would likely force banks to hunt for other channels of funding.

Source: Dnevnik.bg