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Banking association: loan interest rates possibly to rise but not dramatically

Autor: ;mses;
ZAGREB, June 1 (Hina) - There is pressure to raise interest rates on loans in Croatia, but no dramatic increases should be expected, given that interest rates have already risen some 15% and upward moves could be around one percentage points, depending on the type of loans, the Croatian Banking Association (HUB) head, Zoran Bohacek, said on Monday.
ZAGREB, June 1 (Hina) - There is pressure to raise interest rates on loans in Croatia, but no dramatic increases should be expected, given that interest rates have already risen some 15% and upward moves could be around one percentage points, depending on the type of loans, the Croatian Banking Association (HUB) head, Zoran Bohacek, said on Monday.

Factors influencing interest rates are the exchange rate of the national currency, a country risk premium, as well as a fiscal policy, Bohacek said.

The Croatian central bank is doing all it can to maintain a stable exchange rate of the kuna, the country risk is rising due to the economic crisis, and the factor which can help reduce interest rates is the fiscal policy.

Therefore it is necessary to carry out fiscal consolidation, that is, to cut public spending, and perform structural reforms, particularly in times of crisis which are suitable for "painful" reforms which are a must for coming out of the crisis, according to Bohacek.

Finally, it is necessary for Croatia to join as soon as possible the European Union and the European monetary union.

According to the banking association's analysis on interest rates in Croatia in comparison to the eurozone in times of crisis, a majority of interest rates in Croatia go within intervals of interest rates in the eurozone, although Croatia's risk premium has been considerably raised during the crisis, Bohacek said.

For instance, interest rates on housing loans were trimmed in the eurozone during the crisis, due to a reduction of interest rates by the European Central Bank, and only Slovenia, of all members of the European Economic and Monetary Union, had higher interest rates on housing loans than Croatia, Bohacek said.

(Hina) ms

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