YEREVAN, October 18. /ARKA/. Lending rates have increased in Turkey and Armenia, the two countries that began tightening their monetary policies in 2020, while lending growth has slowed significantly, the Black Sea Trade and Development Bank (BSTDB) said in a report.
“For example, in Turkey, the annual growth in lending decreased by 15% in the first half of this year, to 20%, while in Armenia this figure fell by 12% to 2% in the same period,” the report says.
BSTDB analysts explain that, despite the pandemic crisis and economic downturn in 2020 in most countries of the region, the asset quality of the banking sector has not been severely “corroded”.
“This year, when the region’s economy resumed its growth, the quality of the banking portfolio is improving. In Armenia, the share of non-performing loans in the total banking portfolio reached 4.1% as of June 2021, which is lower than in the same period last year, when this figure was 5.7%. Toxic loans in Armenia are still one of the lowest among the BSTDB member states,” the report says.
In early June of this year, Chairman of the Central Bank of Armenia Martin Galstyan stated that the share of non-performing loans in the loan portfolio of Armenian banks reached 7% by the end of April 2021. At the same time, the international rating agency Standard & Poor’s believes that the volume of problem loans in the banking system may increase from 6.1% in mid-2021 to 8% in 2021- 2022
The BSTDB report also indicates that the slowdown in the growth of deposits is less pronounced, since the annual increase in deposits as of June 2021 was 9%, compared to 12% in the same period of the previous year.
“As inflation risks continue to rise both globally and in the Black Sea region, central banks are likely to continue to pursue tight monetary policies to further increase rates, and as a result, some slowdown or even a reduction in lending will occur that will affect not only the corporate sector, but also individuals. In addition, a higher interest rate will affect asset prices in financial markets, which will be another challenge for the financial sector,” the report says. -0-
