* Business, household deposits drop 0.3 pct in Feb.
* Private sector credit shrinks 4 pct yr/yr
* Credit expansion needed to fuel economic growth
(Adds Feb. credit data, background)
ATHENS, March 27 Greek bank deposits dropped in
February for a second month in a row and private sector lending
continued to shrink, central bank data showed on Thursday, with
no sign of the credit expansion needed to spur economic recovery
Deposits of businesses and households dropped to 160.5
billion euros ($221.3 billion) from 161 billion in January, to
their lowest level since October, the Bank of Greece said,
mainly due to a decrease in business deposits.
Greece's economy is expected to pull out of a six-year
recession this year. The central bank projects national output
will expand by 0.5 percent and has said credit expansion will be
crucial in fueling growth.
February data showed lending to the private sector shrank 4
percent year-on-year, with the pace of contraction unchanged
from a month earlier.
Hit by austerity and record unemployment above 27 percent,
Greek households have been tapping savings to cope with economic
hardship as banks struggle with rising amounts of non-performing
Falling deposits have weakened banks' capacity to provide
fresh loans to businesses and households but lenders have
started to regain access to capital markets, which can help
funnel liquidity to the economy.
High borrowing costs have also dampened companies' and
citizens' demand for credit. Average real interest rates on new
loans hit 7.2 percent in January despite record-low ECB
Loans to businesses, a narrower measure in the private
sector overall credit figures, dropped 5.2 percent in February
year-on-year, the same pace of decline as the previous month,
the Bank of Greece said.
Lending to households and private non-profit institutions
shrank 3.3 percent, with the pace of contraction easing a touch
from 3.4 percent in January.
(Reporting by George Georgiopoulos and Harry Papachristou;
Editing by Susan Fenton)