Political instability complicates the activities of the central banks of the region

(Photo: Ti_ser/shutterstock.com)

While talking at the panel “Key challenges to monetary policy and bank supervision in 2016”, the vice-governor of the Croatian National Bank Michael Faulend emphasized that the political risk is a very important factor in the high interest rates.

- It is only when the economy of a country has recovered that the recovery of the total economic growth becomes possible – he stated and added that Croatia had a mild growth rate of 1.6% the previous year.

According to him, it seems that the politicians are not aware of the seriousness of the situation and are either not carrying out structural reforms or they are not as strong as they should be, which is the main problem for the central banks.

The governor of the National Bank of Macedonia Dimitar Bogov said that the political situation in the country, together with the crisis in Greece, had influenced the Macedonian economic growth, the largest one in the region, to be 3.7% instead of the planned 4.2% the last year. He stated that the expectations were for the growth to be between 1.6 and 3.5% in the current year due to current events.

Bogov also pointed out that Macedonia had, despite having faced great challenges in the previous 20 years, a stable foreign exchange rate, which was, as he pointed out, “an imperative for small economies which provides a stable environment for businessmen to realize their plans”.

The governor of the Central Bank of B&H Senad Softic stated that the banking sector in the country was over-liquid and that the Central Bank of B&H was special relative to other banks due to the currency being tied to the euro, which had been shown to be very good. He pointed out that the foreign exchange reserves of B&H were EUR 8.7 billion, the largest thus far, and that the balance of trade in the first quarter of 2016 had been 4.4% and that it would be 3.5% by the end of the year.

The vice-governor of the Bank of Slovenia Primoz Dolenc assessed that the country had good institutions for protecting the banking sector and the financial stability and that they had become better organized with Slovenia's accession tot he EU, whereas the governor of the Central Bank of Montenegro Milojica Dakic said that Montenegro was in the process of the EU accession negotitations and that the Central Bank played a significant role in it. He added that the current year had started well for Montenegro and that, according to the latest data, there had been EUR 250 million of new loans, 31.4% more than the previous year. According to him, Montenegro's non-performing loans have been halved and are now 11.99% of the total loans, which is below the average in the region.