Serbia “risky” for foreign banks

Serbia, Estonia and Latvia are the most at-risk countries in Central and Eastern Europe when it comes to domestic hard currency debts, according to the IMF. The International Monetary Fund states that Western banks risk losing USD 160bn of a total USD 1.6 trillion placed in the Central and Eastern European region, daily Danas writes. Serbia “risky” for foreign banks Economic analyst Bosko Zivkovic told Danas that Financial Times analysts earlier warned that Serbia would face the same problems with servicing foreign private debt as the group of Baltic states. “Analysts of that magazine see a problem in the fact that credit was approved to customers and industry in foreign currency, so every change in the exchange rate of the reserve currency, in this case the euro, causes a growth in credit risk and impairs the ability of the borrower to return the loan,” Zivkovic said. According to fellow analyst Vladimir Gligorov, the Financial Times analysis is not far off the mark, “because the fact that we reached an agreement with ten of the largest banks in central Europe does not mean that the problem of debts and servicing has been overcome.” “Information that the real estate sector in Serbia is not able to regularly service its debts to foreign banks suggests that this sector is bankrupt,” Gligorov warned. “The Serbian government clearly has no idea how it will establish the conditions for economic growth either next year, or in 2011. That is the core of the problem, because domestic demand cannot be increased, wages will be frozen, exports are at a standstill, and there is no investment,” he added.

Serbia “risky” for foreign banks

Economic analyst Boško Živković told Danas that Financial Times analysts earlier warned that Serbia would face the same problems with servicing foreign private debt as the group of Baltic states.

“Analysts of that magazine see a problem in the fact that credit was approved to customers and industry in foreign currency, so every change in the exchange rate of the reserve currency, in this case the euro, causes a growth in credit risk and impairs the ability of the borrower to return the loan,” Živković said.

According to fellow analyst Vladimir Gligorov, the Financial Times analysis is not far off the mark, “because the fact that we reached an agreement with ten of the largest banks in central Europe does not mean that the problem of debts and servicing has been overcome.”

“Information that the real estate sector in Serbia is not able to regularly service its debts to foreign banks suggests that this sector is bankrupt,” Gligorov warned.

“The Serbian government clearly has no idea how it will establish the conditions for economic growth either next year, or in 2011. That is the core of the problem, because domestic demand cannot be increased, wages will be frozen, exports are at a standstill, and there is no investment,” he added.