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BELGRADE, Aug 29 (Tanjug) – About 65 percent of the value of total domestic loans, which according to July data amounted to 2,590.2 billion dinars (about 20 billion euros), were indexed or approved in euros, and 43 percent of them were linked to the European interest rate Euribor, whose fall will reduce the installments in its repayment, the National Bank of Serbia told Tanjug today.
The reduction in Euribor should also be reflected in the lower price of new loans in euros.
The Euribor has a greater impact on lending to the economy, given that the economy has a higher proportion of loans indexed to the euro and loans in euros – 83 percent, compared to loans to households – 44 percent.
“According to July data, around 43 percent of the value of total domestic loans was tied to the Euribor, so the Euribor reduction is directly reflected in its lower level of war,” they say in the NBS.
By the way, the interest rate on three-month interbank loans in the euro zone, the Euribor, fell this week to a record low of minus 0.49 percent.
The Central Bank of Serbia states that in addition to lower installments for loans that are in amortization, the Euribor reduction should be reflected in a lower price of new loans in euros, since it contributes to a lower price of sources for loans in euros.
Of the loans in euros, some were approved at a fixed interest rate and others at a variable interest rate, a maximum of three or six months Euribor increased by the corresponding margin.
When it comes to home loans, home loans are primarily related to the Euribor.
These loans are almost entirely indexed to the euro, unlike cash loans, which are almost entirely in dinars and whose level of annuities and the price of new loans are affected by the change in interest rate NBS reference.
And that is usually indirectly through changes in interest rates in the Belibor money market, to which credit products are mainly linked, explains the NBS.
In the economy, investment loans are mainly related to the Euribor, while in the case of working capital loans, the proportion of loans in dinars is higher and amounts to about 26 percent.
The NBS says that the fall in the Euribor certainly affects the price of loans in Serbia, but also that it is noted that the fall in interest rates on euro loans was more pronounced than the fall in the Euribor.
Such a reduction in interest rates, they say, is the result of several factors: the reduction in the risk premium, which in June was approximately 180 basis points lower than in May 2013, as well as the increase in the country’s credit rating. and the increasing competition between banks in Serbia.
Thus, from May 2013, when the SbN’s monetary policy easing cycle began, until June 2020, the six-month Euribor fell by 0.5 percentage points, while the weighted average interest rate of new loans indexed to the euro and in euros fell by 4.6 percentage points. and the population by 4.4 percentage points.
In June, it was 2.7 percent for the economy and 3.7 percent for the population.
In the same period, the cost of repayment of existing loans, that is, the weighted average interest rate of existing loans indexed to the euro and loans in euros to the economy, fell by 4.0 percentage points and to households by 3.3 percentage points.
In June, it was 2.8 percent for the economy and 3.6 percent for the population.
The NBS notes that the Euribor movement has had higher volatility than usual since the beginning of the year.
The coronavirus pandemic and a significant reduction in economic activity affected the lack of liquidity in the market and the growth of the Euribor, which was more pronounced in the second half of April, when the three-month Euribor was -0.16 percent. hundred.
During this period, the main central banks took numerous steps in the direction of very expansionary monetary policies.
This affected the growth of liquidity in the banking system and the fall of the Euribor to record low levels and close to the interest rate of the European Central Bank on deposit facilities (-0.5 percent), which is considered practically the limit lower, because banks can maintain excess liquidity with the ECB. that rate.
The Central Bank of Serbia says that the future movement of the Euribor is difficult to predict, considering that it is a market category determined by supply and demand.
However, the movement of this rate will largely depend on the policy of the European Central Bank in the next period, that is, on whether the ECB will continue and to what extent it will continue an expansionary monetary policy, according to the NBS.
They also point to the fact that inflation in the EU has been below target for a long time, and that the EU economy is not achieving expected growth, but there is talk of a recession in some EU member states.
The NBS notes that currently market participants do not expect a reduction in the ECB rate on deposit facilities, therefore no further significant falls are expected in the Euribor rate, which reached a historic low in August (-0, 49% for the three-month EURIBOR).
However, the stimulus monetary policy of the ECB (securities buyback programs) will continue for a longer period, with the higher expected growth of banks’ liquidity surpluses, therefore no further growth of these is expected. rates in the next two years.
Thus, the growth in interest rates could occur in the case of greater financial risks after the relaxation of fiscal measures by which the governments of the countries are currently providing assistance to the economy to eliminate the consequences of the virus pandemic coronary or changing the business cycle.
(Kurir.rs/Tanjug)
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