Movement of interest rates on loans and deposits in the countries of the region

Comparison of interest rates in different economies is complicated due to two main reasons. First, the level of interest rates largely depends on the monetary policy in each country, i.e., on the reference interest rate dictated by the domestic central bank, as well as on the level of inflation and exchange rate fluctuations, which have a significant direct impact on the level of nominal interest rates, writes the Patria news agency.

The second problem is related to the different methodologies used in calculating average interest rates. In this case, it was chosen to observe interest rates tied to the euro, which should therefore not be influenced by different domestic monetary conditions.

The problem of different methodologies has been overcome given that the countries in the region have adopted the standardized methodology of the European Central Bank (ECB), so they all produce data according to the same methodology. The overview was made based on interest rate statistics published by the Croatian National Bank, the National Bank of Serbia, the National Bank of Macedonia, and the Central Bank of Bosnia and Herzegovina on average weighted interest rates on loans and deposits to non-financial corporations and households, expressed on an annual basis and produced according to the methodology published by the ECB for interest rate statistics. In this case, the snapshot was made for only one month, taking the most recent data from July 2014, and variations over time, which can be significant from month to month, were not considered.

Interest rates on loans to non-financial corporations with a currency (euro) clause

The level of interest rates on loans in domestic currency with a currency clause for the euro, extended to non-financial corporations, is quite uniform in the region. Thus, interest rates on short-term loans to companies were 6.5% in BiH, 6.9% in Croatia, 7.1% in Macedonia, and 7.3% in Serbia. The situation is similar with interest rates on long-term loans, but at a slightly higher level, with rates recorded at 7.5% in BiH, 7.5% in Macedonia, 6.1% in Croatia, and 8.3% in Serbia.

Interest rates on loans to households with a currency (euro) clause

Housing loans

For loans to households, interest rates on housing loans and loans for other purposes (cash non-purpose loans) were observed due to their large share in total household loans. Interest rates on short-term housing loans to households were 5.4% in Macedonia, the same level was recorded in Croatia, 5.5% in Serbia, while in BiH they were 6.2%. Larger differences were recorded for long-term housing loans, ranging from 5.2% in Croatia, 5.5% in Serbia, 5.7% in Macedonia, to 8.1% in BiH. It should be noted that the level of interest rates is significantly influenced by various types of credit schemes and guarantees that exist in these countries, through which the government seeks to cover part of the risk, thereby reducing the level of interest rates.

Other loans (non-purpose, cash)

Interest rates on other loans to households show greater deviations within the region, with short-term loan rates at 6.6% in Croatia, 8.5% in BiH, 11.8% in Serbia, while Macedonia does not separately publish interest rate indicators for loans by purpose. Interest rates on long-term loans are as follows: BiH 8.0%, Croatia 8.1%, and Serbia 12.5%.

Interest rates on deposits of non-financial corporations in euro currency

Interest rates on deposits of non-financial corporations in euro currency for deposits up to one year ranged within a relatively narrow span from 1.7% in Serbia, 1.9% in Macedonia, to 2.1% in BiH and 2.3% in Croatia. These values are significantly influenced by the possibility of commercial banks borrowing directly from the central bank, giving banks other sources of financing, unlike banks in BiH. Much larger fluctuations are also observed in average rates on time deposits of non-financial corporations over one year, where rates in Serbia (0.8%) are much lower than those recorded in Macedonia (2.8%), BiH (3.08%), and Croatia (3.2%).

Interest rates on deposits of households in euro currency

Interest rates on deposits of households in euro currency with a maturity of up to one year did not show significant differences among the countries in the region, as they were 1.7% in Macedonia, 1.8% in Serbia, 1.8% in BiH, and only slightly higher in Croatia at 2.2%. Given the longer maturity for deposits with a term over one year, interest rates are generally at a higher level, as banks „value“ longer-term deposits, considering they can more easily place them for a longer period. The lowest rates were in Serbia at 2.5%, followed by slightly higher rates in Macedonia and Croatia at 2.8% each, while in BiH they were the highest at 3.2%.