Montenegro: Central bank chief expects interest rates to decline in near term

The interest rates on loans in Montenegro are expected to decline in the near term, the Central Bank of Montenegro (CBCG) Governor Milojica Dakic said over the weekend. He noted that the local banks have approved EUR 250mn worth of new loans since the start of this year and that the NPLs have been reduced by half. He also said that the entry of three new banks on the market has also contributed to the reduction of interest rates. Still, he said that the recent period of political instability negatively affected the work of the banks, lending rates and economic growth.

The average effective lending rate on newly approved loans dropped to 8.32% in March from 8.33% in February and remained lower compared to end-2015, when it stood at 8.53%, according to the latest central bank data. The value of non-performing loans (NPLs) fell by 18.3% y/y, or EUR 80.6mn, to account for 12.0% of gross loans at end-Q1.

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