Due to inflation, the risk of price increases and global uncertainty, interest rates are not expected to drop over the next decade. This conclusion was reached at the regional governors’ summit held in Belgrade.
According to economic analyst Predrag Zečević, this is not a positive message for those in charge of monetary policy.
“The situation in the Eurozone is stabilized, with inflation below 2%. I would remind you that inflation in Montenegro was at 0% in October, and that’s what you can expect in November as well,” said Zečević.
Interest rates are influenced by market security, according to analyst Mirza Mulešković, but he emphasizes that since 2019, the global uncertainty caused by the COVID-19 pandemic and later the war in Ukraine has also affected both the economy and trends in the banking sector.
“The announcement that we won’t see a significant drop in interest rates in the future is also a warning for decision-makers, the economy, and citizens. We are likely facing a more expensive life and will have more reasons to manage our consumption more carefully. On the other hand, this is also a reminder for all countries on how they manage public finances,” said Mulešković.
Zečević argues that there is room for lower interest rates, pointing out that banks in the Western Balkans are making record profits. This, he claims, is the result of high interest rates and fees for services. He believes that, following the examples of Croatia and Italy, an additional tax should be imposed on the extra profits from deposits, which, for example, exceed EUR 5 billion in banks operating in Montenegro.
“I don’t think the governors should just go along with the banks, but should follow Croatia’s lead, which imposed taxes on deposits. And secondly, we need to follow Italian Prime Minister Giorgia Meloni’s example, who introduced a special tax on the banking sector’s extra profits of 40%. This money from the tax will be used to help young people buy their first home,” Zečević said.
Mulešković concludes that the message from the governors is also a warning for businesses, which are heavily investing and executing projects financed by loans.
“This is another, so to speak, alarm for businesses and decision-makers. It’s an important piece of information that should be considered when creating policies to support the economy, which should ultimately lead to long-term economic growth and development,” emphasized Mulešković.
According to the latest analysis from early November, the profits of 11 banks operating in Montenegro exceeded EUR 136 million, which is EUR 24 million more than last year’s results for the same period.
