Montenegro's public debt rises 16.9% y/y to 1.71bn in end-Sept 2012

By bne IntelliNews January 11, 2013
The weighted average effective lending interest rate on newly extended loans fell to 11.04% in Nov 2012 from 11.32% a month earlier as both rates on new household and corporate loans declined in monthly terms, central bank data showed. However, November's average effective lending interest rate was higher compared to the end of 2011 when it stood at 9.64%. Rates on new corporate loans rose by 0.81pps to 10.46% in Nov compared to the end of 2011. The increase of rates on household loans was smaller (up 0.19pps to 11.95% over the period). Volume of new loans dropped by a monthly 12.6% to EUR 45.5mn in November following a 18% m/m increase in October. Compared to Dec 2011, newly extended loans decreased by close to 70% mainly due to falling corporate loans (down by 74% to EUR 26mn in Nov). Lending activity in Montenegro has been declining in annual terms since May 2009 as interest rates remained high partly reflecting uncertain local environment. In November 2012, the Montenegrin central bank (CBCG) introduced a ceiling on the effective interest rate on new corporate (at 14%) and household (at 15%) loans in an attempt to limit excessive lending rates. According to the CBCG, high lending interest rates contribute to increase the level of non-performing loans and hamper real sector liquidity as well as the overall financial sector stability. In Jan-Sep 2012, 22% of new household loans were approved at an interest rate higher than 15% while 33.2% of new corporate loans were extended at an interest rate above 15%.
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