Czechs' unpaid debt rises at fastest rate in last 10 years

In the first half of 2023, Czech citizens’ unpaid debt surged by 6.4 percent compared to the previous year, reaching a total of CZK 29.2 billion – the highest annual growth rate in the past decade, according to the Czech Credit Bureau.

Simultaneously, the collective indebtedness of the population increased by 2.6 percent year on year, amounting to a total of CZK 3.22 trillion. This data reflects the expansion of unpaid short-term debt, which grew by 8.7 percent to reach CZK 24.1 billion. Conversely, unpaid long-term debt shrank by 3.7 percent to CZK 5.1 billion.

Jiří Rajl, the Executive Director of the Czech Non-Banking Register, remarked: "It's definitely a warning sign at the very least, because these changes happened in a very short time. On the other hand, inflation is slowly decreasing and forecasts are for an early economic recovery, so the deterioration can only be temporary. I definitely don't consider the situation alarming yet, but there is a need to take it into account."

The second quarter concluded with 174,000 borrowers in default of their short-term loans, a 0.7-percent increase from the previous year. The average amount left unpaid was CZK 138,500, marking a 7.9-percent year-on-year increase.

The growth in outstanding consumer debt is apparent across all age groups, with the most pronounced rise among individuals aged 30 to 34, showing a 20-percent increase. This age category also boasts the fastest-growing total volume of loans for consumption. Notably, the most significant increase in unpaid debt occurred in the Central Bohemian and Pardubice regions.

Housing loans reached a cumulative volume of CZK 2.67 trillion during the first half of the year, reflecting a 2-percent annual increase. Concurrently, consumer debt climbed to CZK 554.5 billion, experiencing 5.4-percent growth.

A noteworthy trend is the deceleration in the rate of indebtedness through long-term loans. The prior year witnessed housing loans surging by up to 18 percent annually. "This is mainly due to the low interest in mortgages, which are almost unaffordable for many groups of residents due to high interest rates and high purchased real estate prices," explained Lenka Novotná, executive director of the Bank Register.

The average amount of long-term debt per individual reached CZK 2.5 million by the end of June, marking a 4.9 percent increase from the previous year. While long-term loans increased in all regions except Prague, short-term debt experienced more widespread growth, particularly in Prague, where it surged by 7.4 percent.