Perko: Slower Interest Rate Growth Due to High Bank Liquidity

The director of the Croatian Banking Association (HUB), Tamara Perko, stated on Thursday that the main reasons for the slower growth of interest rates in Croatia compared to Western Europe are high liquidity and competitiveness of the Croatian banking system, as well as a stable deposit base.

Perko made this statement during the 26th scientific-professional conference Financial Market.

She emphasized that Croatian banks are stable and liquid, adding that ‘the Croatian banking system is in a better situation than ever’.

She reminded that the ECB started raising interest rates in July last year, stating that this increase has not fully transferred to the Croatian market where we have a much smaller transmission of interest rate increases for several reasons.

One of the main reasons she mentioned is the liquidity of the banking system, which, according to her, was highly liquid even before the introduction of the euro, and additional liquidity came with the introduction of the euro.

We also have a stable deposit base as a source of financing for the Croatian banking system, as banks would borrow more expensively on foreign markets, and that increase in interest rates would then transfer more quickly to the Croatian market, she said.

The slower growth of interest rates, in her opinion, is also a result of the high competitiveness of the banking system and high cost efficiency, which is why interest rates are lower than in some Western European countries.

Continued Growth of Credit Activity

Perko stated that the average interest rate on housing loans in Croatia is now at 2.92 percent, with an annual increase of 0.4 percentage points.

For consumer loans, the average is 5.45 percent, with an annual increase of 0.9 percentage points.

She said that both consumer loans and loans to companies are growing, although the growth of loans to companies has slowed somewhat, but is still increasing.

We still have growth in credit activities in Croatia, and I hope that growth will continue, as investments are a good prerequisite to avoid recession, she emphasized.

Tamara Perko assessed that the domestic banking sector was stable even before, and with the entry into the eurozone, banks became part of the banking union, which means that there are additional safeguards in case of any banking crises.

She mentioned the recent crisis in America and Switzerland, emphasizing that the Croatian and European banking systems, thanks to all mechanisms, are very stable and that there is no reason for concern in that regard.

The HUB director said in her introductory speech at the conference that the pandemic and the war in Ukraine have brought new challenges but also opportunities. Entry into the eurozone and Schengen has brought new opportunities for the economy, and she is most looking forward to the next step, membership in the OECD, which, in turn, presupposes various preliminary steps and reforms.