This sluggishness in building up development momentum is a result of the unfavourable international and internal political circumstances which existed until recently, and also of the structural shortage of the technological and managerial expertise necessary to stimulate a modern, open economic system. The first stage will be more dynamic and more spectacular but the second will allow the formation of a banking system which is optimal from the point of view of the national economy. Market clearing Interest rates fell dramatically last year. The free interbank market succeeded in maintaining single-figure interest rates for the first time in many years. However, the benefits of these changes are slow in filtering through to the banks' clients.
Lending rates are still very high and loans are difficult to obtain.
I believe that the effects of these changes on the money market will be passed on to the rest of the economy during 1997. This will increase the demand for money and thereby increase interest rates on the money market while lending rates will continue to fall throughout the year. The combination of these trends will reduce interest rate margins. At the end of 1997 the banks' directors will see for the first time whether their organisations are able to survive with interest rate margins which are sustainable in the long term. Some of them could be unpleasantly surprised.