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January 30 – February 5, 2017

National Bank will not enforce discount rate reduction

The situation has not changed

By late 2017, provided inflation is low and a balance of payments is stable, the discount rate could be reduced to 14-16% per annum. The key task set by the National Bank for 2016, i.e. to reduce inflation to 12% was achieved and as of January 18th, 2017, the discount rate was reduced to 17%. The current monetary policy is likely to continue due to fears of further growth in bad debts in the banking system. A further reduction in rates in the economy is likely to be carried out by reducing the banks’ margin. The banks are likely to increase the number of claims in courts requesting the arrest of collateral from troubled enterprises and putting it on sale. Bankruptcies are likely to increase in number among enterprises of different ownership forms. Amid high interest rates on loans, the only option for enterprises to raise funds would be to issue own bonds in national and foreign currency offering higher profitability compared with bank deposits.

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