Hryvnia Loans for Businesses and Individuals: Rapid Cost Increase and Its Impact on Ukraine’s Economy
In July 2024, Ukraine’s financial sector experienced significant shifts in the cost of credit products for both businesses and citizens.
Data from the National Bank of Ukraine reveal a swift rise in hryvnia loans, marking an important signal about the changing financial landscape of the country.
The average interest rate on hryvnia loans to corporate clients reached 16.9% annually, which is an increase of 1.4 percentage points compared to the previous month.
This level was the highest since April 2024 and indicates an active trend of rising borrowing costs for enterprises.At the same time, the interest rates on foreign currency loans for businesses increased to 5.9% annually, up by 0.2 percentage points, whereas for individuals, hryvnia loan rates climbed to 36.2%, up by 0.3 percentage points.
This trend suggests that borrowing costs for households are becoming more expensive, potentially leading to a reduction in consumer borrowing activity.In terms of deposit attraction, banks somewhat increased their interest rates for legal entities — by 0.1 percentage points, reaching 10.2%.
For residents, deposit rates slightly declined by 0.2 percentage points, steadied at 10.9%, which somewhat restricts incentives for new savings.
Meanwhile, foreign currency deposit rates remained almost unchanged at 0.7% for businesses and 0.9% for individuals.On the foreign exchange market, rates were relatively stable, remaining at 0.7% and 0.9% respectively.
Interbank lending rates in July decreased to 15.7%, down by 0.7 percentage points, indicating some easing in interbank activity, with overnight lending rates declining by 0.5 percentage points to 14.8%.These changes are happening amid shifts in monetary policy.
In March, the National Bank raised its benchmark rate to 15.5%, but since then, it has kept it at this level three times, most recently in July.
Internal and external factors necessitate close monitoring of regulator actions and their effects on the economy.Overall, the trend of rising borrowing costs signals adjustments in risk management and market expectations regarding economic stability.
It is anticipated that this trend could continue through the remainder of the year, with significant loan cost increases likely impacting investment activity and consumer demand in Ukraine.