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Balkan banking: Time to talk

At the beginning of 2007, Euromoney wrote that the retail lending boom in the Balkans was putting pressure on the region’s banking systems and that cooperation between banks and authorities was vital. But as the world’s economic downturn pushes into southeastern Europe, that warning might be going unheeded. Jethro Wookey reports.


THE BALKAN REGION has so far seen little in the way of negative effects from the credit crunch. Growth has remained strong. In Croatia, for example, real GDP growth reached nearly 6%, according to the IMF. This growth was largely the result of surging domestic demand. As income expectations rose in the wake of economic growth, so too did financial activity among consumers. In Serbia, where GDP growth was 7.5% last year, the average net income in 2007 was 19.5% higher than in 2006, according to the National Bank of Serbia (NBS). With the expectations and promises following that country’s national elections in May of this year, employees’ income expectations have not fallen with the downturn in the global economy, especially considering that real net wages growth for the first six months of 2008 was up 4.3% compared with 2007.

The retail lending boom that was in evidence last year was caused partly by this high level of consumer confidence and by the arrival of large foreign banks, which now dominate the region. "Over the last few years, foreign banks have rushed in," says Michael Mueller, chief executive of RZB in Bosnia and Herzegovina.

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