Statement of the Governor of the CBBH to the newspaper "Dnevni Avaz"

Date of this article publication: 15 April 2020

„There should be no increase in interest rates“, the Governor of the Central Bank of Bosnia and Herzegovina Senad Softić told for "Avaz" newspaper, commenting on the unstable economic situation caused by the Coronavirus pandemic.

In question are interest rates on consumer and other loans placed by banks in Bosnia and Herzegovina.

Repayment moratorium

Recently, the FBH Banking Agency introduced a moratorium on repayment of loans to citizens whose creditworthiness has been reduced because of the negative effects of the declared disaster in the Federation of BH.

But with the rise of the recession and due to the growing economic crisis in Europe and the world, there is a justified fear of rising interest rates.

Softić explained to us that the movement of interest rates on loans is related to the movement of EURIBOR.

• „As for the movement of interest rates on loans in the coming period, it will be partially generated by the movement of interest rates on the European market, bearing in mind that long-term interest rates in BH are mainly related to the movement of EURIBOR“, said Softić.

In the medium term, Softić says that no increase in European Central Bank's (ECB) interest rates is expected.

• „However, in the current situation of the crisis caused by the Coronavirus, it is very ungrateful to forecast future economic and monetary trends. Domestic banks rely significantly on domestic sources of financing and, as long as domestic deposits are stable, interest rates should not rise“, says Softić.

Governor Softić points out that it is already certain that in BH in the first and second quarters we will record a decrease in economic activity compared to the last year.

The recession is coming

• „This means that we can already talk about the recession in the first half of the year. However, without any relevant statistics for March, it would really be disproportionate to talk about the magnitudes of challenging growth. The pandemic simply does not have a single episode in recent history to compare to. Theoretically, we know what we can expect, but we can only speculate about how serious and long lasting the slowdown in economic growth will be“, he concludes.

Trends to be normal in May

Governor Softić hopes that we will start returning to normal trends as early as next month.

• I can only say that I expect that if activities start to return to some normal course in May, then the recession should be neither so long-lasting nor overly dramatic with a significant loss.