How to utilize the exceptional liquidity of the Croatian financial sector is a million-dollar question.
There is no simple solution, agree economic analysts who have tried to answer the inquiry from Lider about how to engage the banking surplus liquidity. According to HNB data, there was an average surplus of more than three billion kuna per day last year. This year, that average has grown to 4.3 billion, with some days reaching as high as 7.7 billion kuna. This can be added to HNB’s six billion kuna that were released solely for the purpose of financing the economy, which remains untouched in the account. On the other hand, the real sector is drowning in illiquidity. Although it may seem that a simple solution would be to give companies that money, things become complicated when it is necessary to respond to how to do that. The problem is not only the lack of quality projects. A major issue that experts warn about in the new issue of Lider is that interest rates are higher than profits. The cost of capital is simply too high, and as long as the contamination of bank loans is at a level of 25 percent, it is unrealistic to expect interest rates to fall. Another problem is the reduction in consumption and demand for products from domestic companies, whether through increased taxes or due to wage cuts and layoffs. Fear of the future and, in their case, expensive borrowing delays consumption. Analysts see the way out of the vicious circle only through the introduction of fresh ideas connected into a complex exit strategy – something that the authorities persistently avoid.
