Growing indebtedness in Serbia

Growing indebtedness in Serbia


By Miloš Mitrović – Belgrade

The indebtedness of Serbian citizens has increased in recent months, according to data released by banks. In the end of July, approximately 290.000 debit accounts were negative. At the same time, bankers expect further increase of indebtedness due to seasonal spending such as summer vacations and the start of the new school year.

There are no many Serbian citizens, already indebted, which are eager to request new bank loans, National Broadcasting Corporation (RTS) reported. Nevertheless, in the last few months total amount of citizens loans – unlike the business loans –  was increased for 1.3 percent, to RSD 610 billions (EUR 5.3 billions).

An average salary in Serbia is approximately RSD 44.000 (EUR 400), which is insufficient amount for monthly spending taking into account both raising inflation and depreciation of dinar, national currency. The most of citizens are looking for the “solution” in cash loans, as well as in credit cards and overdrafts.

Overdraft interest rate is about 35 percents; if debit accounts become negative, it is double higher. More than 290.000 debit accounts owners entered the “negative zone” in the end of July. “The increase of delays (in paying off the loans) is the consequence of financial indiscipline; citizens were paying their summer vacations, without taking into consideration that September was approaching with blow for their budgets”, Dušan Uzelac, owner and Managing Director of website said.

“The best solution is to avoid the loans. However, if this is not possible, citizens should borrow the money wisely. They should treat the loan as the relief, rather than their own income. They must be aware that they have to pay off the loans in time”, Uzelac stressed. The cash credits average interest rate is 20 percents.

“On one hand, cash credits are cheaper than overdrafts. On the other, if one decide to take cash credit to buy the car he cannot use that money for other purposes, such as to pay off the taxes”, Miroslav Rebić from Societe Generale Bank told RTS. “Overdrafts are expensive, but simple; the citizens got used to them”.

Economists and bankers expect that citizens will continue to borrow the money in the months to come. Credit expansion statistically signals that the economy is recovering, economist Goran Nikolić said.

“However, this is not good for the citizens because their indebtedness is increasing and they are supposed to pay the interest rates”. He recalled that purchasing power of the citizens of Serbia dropped for six percents since the September 2012.