Do borrowers demand less credit from banks during pandemic?

In 2020, similar to many developing countries, Armenia experienced a significant increase in Google searches for credits during the lockdown period. There are two possible reasons for this surge in searches. Firstly, the pandemic’s financial repercussions may have resulted in financial difficulties for many individuals. Secondly, the widespread adoption of technology during the lockdown may have prompted people to rely more heavily on online resources.

But also there are several arguments that suggest borrowers may demand less credit from banks during a pandemic:

1. Economic uncertainty: During a pandemic, there is a high level of economic uncertainty, which can lead to a decrease in consumer and business confidence. This can result in a reduction in borrowing for investments and consumption as individuals and businesses become more cautious and prioritize saving over spending.
2. Job losses and income reduction: Pandemics can lead to job losses and income reduction, which can negatively impact the ability of borrowers to repay their loans. As a result, borrowers may be less likely to take on additional debt during a pandemic.
3. Limited credit availability: During a pandemic, banks may become more risk-averse and reduce lending to mitigate their own losses. This can result in a decrease in credit availability, making it more difficult for borrowers to obtain loans.
4. Government support programs: In response to a pandemic, governments may implement support programs, such as loan guarantees or debt forgiveness, which can reduce the demand for credit from banks.

Overall, these factors suggest that borrowers may demand less credit from banks during a pandemic due to economic uncertainty, job losses and income reduction, limited credit availability, and government support programs. However, it is important to note that the impact of a pandemic on credit demand may vary depending on the specific characteristics of the pandemic and the economic conditions in the affected region.

According to Google Trends data, there was a notable increase in credit-related searches in Armenia throughout 2020, suggesting that this trend was particularly prevalent during the pandemic.

As a novel approach, I tried to broaden my search beyond a single keyword, such as “credit”. In Armenia, people use the Armenian alphabet, but some people write Armenian words in the Latin alphabet when searching for information online.

For instance, “credit” in Armenian is written as “vark” (վարկ). The first figure shows the trend in searches for “credit” in the Latin alphabet (red line) and Armenian alphabet (blue line). The trend is higher for searches in the Latin alphabet and has been increasing during the pandemic year.

The second figure displays the trend in searches for “credit” and “online credit”. The trend for “credit” searches is higher at the end of 2020.

The third figure shows searches for “credit”(кредит) in Russian, with the red line indicating “credit” searches and the blue line representing “online credit” searches.

Finally, the fourth figure displays searches for the word “bank” in Armenian, English, and Russian. The trend is higher for searches in English (green line) compared to the other languages.

The final graph is of particular interest as it depicts the search trends for the word “credit” in Armenian, online credit, and the Armenian word “credit” written in Latin alphabet.

These searches in the Republic of Armenia present a compelling avenue for research. Firstly, these distinct search groups are comprised of individuals with differing economic behaviors. Secondly, there is a notable data gap in comprehending the current economic situation, which can be addressed by utilizing open-source data such as Google Trends to gain deeper insights into public interests. Thirdly, such data can facilitate credit nowcasting and forecasting by providing access to real-time data.