Real Effects of Crisis Have Reached CESEE Households: Euro Survey Shows Dampened Savings and Changes in Borrowing Behavior

Evidence from the 2009 fall wave of the OeNB Euro Survey in Central, Eastern and Southeastern Europe (CESEE) provides indications of the real effects that the economic downturn has had on CESEE households since the crisis arrived in the region. On the asset side, we find that the ability of households to save has been dampened, which may be explained, at least partly, by the fact that many households had to use the deposits they withdrew to finance their current expenses. On the liability side, we find that a substantial share of CESEE households indebted in foreign currency has already reacted to the crisis, be it by converting their loans, be it by renegotiating their credit terms. All in all, the overall degree of euroization of households’ financial assets has remained virtually unchanged throughout the crisis and can be expected to increase even further: euro deposits are perceived as increasingly attractive despite higher interest rates offered for deposits in local currency. At the same time, the crisis may have increased households’ perception of the exchange rate risk associated with foreign currency loans. As a consequence, the appetite for foreign currency loans may be expected to keep declining in the years ahead, which would go hand in hand with recent efforts on the regulatory side.