National Bank concerned about lending growth

 

The National Bank of Belarus (NBB) expressed concern during an enlarged board meeting on Friday that the country’s lending growth rate was too high, a financial expert told BelaPAN on condition of anonymity.

Forecast to increase by between 17 and 20 percent this year, lending to the real sector of the economy rose by 11.9 percent in the first six months, the expert said.

“The National Bank views this lending policy as too aggressive and warns that banks should aim for greater efficiency rather than faster growth,” he said.

Prime Minister Mikhail Myasnikovich said on June 11 that lending to the economy should be increased.

“There is clearly a conflict between the NBB, which seeks to maintain macroeconomic stability, and the Council of Ministers, which is responsible for the growth of Gross Domestic Product [GDP],” the expert said.

The government projected a GDP growth of 8.5 percent for this year, but the National Statistical Committee reported a 1.4-percent year-on-year increase in the first six months. In 2012, Belarus’ GDP grew by 1.5 percent.

In an interview with BelaPAN, Dzmitry Kruk of the Belarusian Economic Research and Outreach Center, described the 8.5-percent GDP growth target as completely unrealistic, considering that interest rates on rubel loans had risen from the NBB’s base refinance rate plus about five percentage points at the end of June to the base refinance rate plus between 10 and 15 percentage points in July. Banks raised their interest rates on rubel loans because rubel deposits had become more profitable.

Experts predict that interest rates on rubel deposits will remain high to prevent people from withdrawing their savings.

“Economic growth will probably be sacrificed for the sake of the stability of the national currency,” independent expert Feliks Charnyawski told BelaPAN. “Otherwise, we may have another devaluation of the rubel and soaring inflation. One way or the other, banks will have to set high interest rates.”