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Serbia, “Indebtedness is growing”, National Bank says

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Interest rates on loans indexed in euros increased in the third quarter and averaged 3.5 percent for the economy and 4.2 percent for the population (compared to 2.6 percent and 3.6 percent in the second quarter), announced Narodna bank of Serbia (NBS)

However, credit growth continued despite citizens and the economy borrowing at higher interest rates in September compared to the second quarter of this year. Interest rates rose due to the tightening of monetary conditions by central banks.

The average interest rate on newly approved household dinar loans increased in the third quarter by an average of 1.6 percentage points and amounted to 10.7 percent.

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According to the latest NBS data, interest rates on almost all types of dinar loans have been increased, with the interest rate on the most common cash loans being increased to 11.2 percent, which is an increase of 1.6 percentage points.

The credit activity of banks continued to grow and in September of this year it increased by 11.7 percent compared to the same period last year. The credit growth in Serbia was still more contributed by lending to the economy than to the population, according to the Report Trends in credit activity in the third quarter of this year.

The interest rate on housing loans (indexed in euros) averaged 3.4 percent, which is an increase of 0.6 percentage points, in September of this year compared to the second quarter.

Loans to the economy increased by RSD 31.7 billion in the third quarter (excluding the effect of exchange rate changes) compared to the same period last year. Investment loans contributed the most to the growth of placements (more than a third of growth), followed by loans for working capital, while lending to companies increased, while loans to public companies declined, NBS data show.

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Loans were mostly taken out by large companies, and in terms of activities, the most represented was lending to the processing industry, trade and agriculture. Lending in the transport sector also increased, while loans to construction, energy and real estate business were on the decline.

Household loans increased by 21.5 billion dinars in the third quarter compared to the same period last year, of which almost three quarters (15.9 billion dinars) related to housing loans, followed by cash loans, according to the NBS Report.

The volume of newly approved loans to the economy in the third quarter amounted to 322.8 billion dinars and was 13.7 percent higher than in the same period of the previous year. Among newly approved loans, loans for liquidity and working capital dominate (59.2 percent), and almost half of those loans were used by micro, small and medium-sized enterprises. Investment loans accounted for 24.7 percent of new loans to the economy.

The demand of companies for loans continued to grow in September of this year, according to banks, mostly small and medium-sized companies take out loans to finance working capital and capital investments.

According to bankers, citizens’ demand for loans is lower in the third quarter, primarily for dinar cash loans and loans for refinancing, but also for housing loans indexed in euros. The situation on the real estate market contributed the most to the drop in demand, with a smaller need to buy durable consumer goods, bankers say.

According to their expectation, the decrease in demand will continue until the end of the year under the influence of the same factors and with a less favorable situation on the labor market, Kamatica writes.

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