IDEAS home Printed from https://ideas.repec.org/p/wii/marepo/1.html
   My bibliography  Save this paper

Unsecured Lending in Central and Southeast Europe

Author

Listed:
  • Amat Adarov

    (The Vienna Institute for International Economic Studies, wiiw)

  • Richard Grieveson

    (The Vienna Institute for International Economic Studies, wiiw)

  • Mario Holzner

    (The Vienna Institute for International Economic Studies, wiiw)

  • Olga Pindyuk

    (The Vienna Institute for International Economic Studies, wiiw)

  • Hermine Vidovic

    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

Addiko Bank’s South Eastern Europe (SEE) region (Bosnia and Herzegovina, Croatia, Montenegro, Serbia and Slovenia) is in the midst of a fairly pronounced cyclical upswing, helped by catch-up effects owing to a generally very poor post-crisis growth performance. We believe however that the peak has already passed for most countries, with a weakening of external conditions (especially in the euro area) presenting big headwinds to growth. Growth rates should remain positive in the medium term, in the range of around 2.5%-4%. Croatia will be the weakest performer, with Slovenia and Bosnia doing best. Convergence with Western Europe should continue, although the pace is likely to slow during the 2020s. The region is quite diverse in terms of the banking sector performance. Banking sectors in Croatia and Slovenia are growing rather slowly, lagging behind their peers in Central Europe and even many countries in the euro area, while in Bosnia and Herzegovina, Serbia, and in particular Montenegro banking sectors are much more dynamic. Non-secured retail loans account for the bulk of loans to households in all the countries, and their share in total loans significantly exceeds the average level for the Eurozone. Slovenia is the leader in terms of digital transformation in the region, in particular when it comes to business digitalisation. Croatia so far significantly lags behind Slovenia, still it performs better than most countries of CEE. The other three countries in the region have not advanced much in digital transformation yet. The region’s financial markets in general and the retail household loan market segment are expected to grow in the long run consistent with the macroeconomic fundamentals of the countries. Under the most likely scenario, by the year 2047 the size of unsecured household loans will increase up to 21.4 bn EUR in Serbia, 19.6 bn EUR in Croatia, 14.0 bn EUR in Slovenia, 8.7 bn EUR in Bosnia and Herzegovina and 2.1 bn in Montenegro. This signifies a marked increase in the size of the market in nominal terms. On average the market is expected to triple over a period of three decades. Over the medium term we expect the markets to grow to levels of 6.9 bn EUR in Serbia, 10.8 bn EUR in Croatia, 5.2 bn EUR in Slovenia, 4.4 bn EUR in Bosnia and Herzegovina and 1 bn EUR in Montenegro, by 2023. This is on average about 20% higher compared to current 2018 levels.

Suggested Citation

  • Amat Adarov & Richard Grieveson & Mario Holzner & Olga Pindyuk & Hermine Vidovic, 2019. "Unsecured Lending in Central and Southeast Europe," wiiw Market Report 1, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:marepo:1
    as

    Download full text from publisher

    File URL: https://wiiw.ac.at/unsecured-lending-in-central-and-southeast-europe-dlp-4823.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084, Central Bank of Chile.
    2. Igor Ljubaj, 2012. "Estimating the Impact of Monetary Policy on Household and Corporate Loans: a FAVEC Approach," Working Papers 34, The Croatian National Bank, Croatia.
    3. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
    4. Savelin, Li & Alvarez Orviz, Roberto, 2017. "Benchmarking institutional and structural indicators in EU candidate and potential candidate countries," Occasional Paper Series 184, European Central Bank.
    5. Mirna Dumičić & Igor Ljubaj, 2018. "Delayed Credit Recovery in Croatia: Supply or Demand Driven?," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 7(1), pages 121-144.
    6. Richard Grieveson & Julia Grübler & Mario Holzner, 2018. "Western Balkans EU Accession: Is the 2025 Target Date Realistic?," wiiw Policy Notes 22, The Vienna Institute for International Economic Studies, wiiw.
    7. Ana Maria Čeh & Mirna Dumičić & Ivo Krznar, 2011. "A Credit Market Disequilibrium Model And Periods of Credit Crunch," Working Papers 28, The Croatian National Bank, Croatia.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ergungor, O. Emre, 2008. "Financial system structure and economic growth: Structure matters," International Review of Economics & Finance, Elsevier, vol. 17(2), pages 292-305.
    2. Una Okonkwo Osili & Anna L. Paulson, 2006. "What can we learn about financial access from U.S. immigrants?," Working Paper Series WP-06-25, Federal Reserve Bank of Chicago.
    3. Bangake, Chrysost & Eggoh, Jude C., 2011. "Further evidence on finance-growth causality: A panel data analysis," Economic Systems, Elsevier, vol. 35(2), pages 176-188, June.
    4. Pradeepta Sethi & Brajesh Kumar, 2014. "Financial structure gap and economic development in India," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 15(4), pages 776-794, September.
    5. Tongurai, Jittima & Vithessonthi, Chaiporn, 2018. "The impact of the banking sector on economic structure and growth," International Review of Financial Analysis, Elsevier, vol. 56(C), pages 193-207.
    6. Knack, Steve & Xu, Lixin Colin, 2017. "Unbundling institutions for external finance: Worldwide firm-level evidence," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 215-232.
    7. Rosen Azad Chowdhury & Dilshad Jahan & Tapas Mishra & Mamata Parhi, 2023. "A Quality Dimension? A Re-appraisal of Financial Development and Economic Growth Nexus in a Quality-Quantity Setting," Working Papers 2023-02, Swansea University, School of Management.
    8. N'dri, Lasme Mathieu & Kakinaka, Makoto, 2020. "Financial inclusion, mobile money, and individual welfare: The case of Burkina Faso," Telecommunications Policy, Elsevier, vol. 44(3).
    9. Massimiliano Affinito, 2011. "Convergence clubs, the euro-area rank and the relationship between banking and real convergence," Temi di discussione (Economic working papers) 809, Bank of Italy, Economic Research and International Relations Area.
    10. Diego Comin & Ramana Nanda, 2019. "Financial Development and Technology Diffusion," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(2), pages 395-419, June.
    11. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, vol. 96(2), pages 255-264, November.
    12. Zaghdoudi Taha & Ochi Anis & Soltani Hassen, 2013. "Banking Intermediation and Economic Growth: Some Evidence from MENA Countries," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 3(4), pages 1-5.
    13. Skare, Marinko & Gavurova, Beata & Sinkovic, Dean, 2023. "Regional aspects of financial development and renewable energy: A cross-sectional study in 214 countries," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1142-1157.
    14. Donatella, Baiardi & Claudio, Morana, 2015. "Financial deepening and income distribution inequality in the euro area," Working Papers 316, University of Milano-Bicocca, Department of Economics, revised 04 Dec 2015.
    15. Yang, Yung Y. & Yi, Myung Hoon, 2008. "Does financial development cause economic growth? Implication for policy in Korea," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 827-840.
    16. Wenwen Sheng & M. C. Sunny Wong, 2017. "Capital Flow Management Policies and Riskiness of External Liability Structures: the Role of Local Financial Markets," Open Economies Review, Springer, vol. 28(3), pages 461-498, July.
    17. Jean-pierre Allegret & Sana Azzabi, 2013. "Financial development, threshold effects and convergence in developing and emerging countries," Economics Bulletin, AccessEcon, vol. 33(3), pages 1899-1921.
    18. Demirgüç-Kunt, Asli & Horváth, Bálint L. & Huizinga, Harry, 2017. "How does long-term finance affect economic volatility?," Journal of Financial Stability, Elsevier, vol. 33(C), pages 41-59.
    19. Alvaro Aguirre, 2017. "Contracting Institutions and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 192-217, March.
    20. Kočenda, Evžen & Iwasaki, Ichiro, 2020. "Bank survival in Central and Eastern Europe," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 860-878.

    More about this item

    Keywords

    Southeast Europe; macroeconomic conditions; financial markets; unsecured household loans; short- and long-term market forecasts;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wii:marepo:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Customer service (email available below). General contact details of provider: https://edirc.repec.org/data/wiiwwat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.