Lower inflation expectations have lead to lower interest rates for loans. National Bank of Moldova data show that in June 2017 the weighted average interest rate for new loans in Moldovan lei dropped to 10.03%, which is 0.23 pp than the previous month and 4.12 pp lower than the same period of last year. During the “15 minutes of economic realism” radio broadcast, journalist Victor Ursu explained that this decrease is not particularly significant, IPN reports.
The decreased interest rates are caused by the announcement of low inflation predictions - in 2018, it will be kept under 5%. Inflation will remain high in the third quarter of this year, but will then rapidly drop to the lower limit of the targeted rate’s variation interval. This motivated bankers to decrease the interest rates for loans.
“Even though statistics indicate that the interest rates for loans in Moldovan lei were slightly above 10%, the effective annual interest can reach 15% because of the banks’ various fees, which increase the cost of loans. The expensiveness of loans is also caused by the high rate of bad credits, currently at 17%. Good customers than have to pay for these bad loans via all kind of fees”, explained Ursu.
These increased expenses don’t affect only new credits, but ongoing ones as well, putting extra pressure on customers who are trying to keep up with the payments, despite growing prices, wage cuts, which basically crushes the sales market for the company’s customers. “Increasing interest rates for loans in Moldovan lei and foreign currencies, selling fixed assets and buying government bonds are among the banks’ most used strategies for improving their financial position in the short-term”, said the expert.
The most popular credits are those of two to five years, accounting for 40% of all issued loans.
The broadcast is produced by IDIS Viitorul in partnership with Radio Free Europe.
