The growth of economies in central and eastern Europe (CEE) region will slow down to an average of 2.8 percent this year, after a strong 3.7 percent growth in 2017, the Italian UniCredit Group said on Tuesday.

The banking company added that Croatia’s GDP would also grow by 2.8 percent, in line with the European Commission’s forecast published earlier this month.

Globally, 2018 will be the ninth year in a row with economic growth of 3.5 percent or more, which has not happened since the 1960s, said Matteo Ferrazzi, UniCredit’s coordinator for CEE strategy, in a news conference which was part of the annual meeting of the European Bank for Reconstruction and Development (EBRD) in Jordan.

In addition, the US economy has also been growing continuously for almost nine years, which is now its second longest period of growth in history, after the streak that had been recorded after 1991. Meanwhile, in the euro zone growth is strong and present in all member countries.

Ferrazzi told reporters that CEE economies have also experienced strong growth, at 3.7 percent in 2017, or even 4.6 percent if Turkey and Russia are excluded. However, due to cyclical slowing down, a somewhat lower rate of growth is expected, forecast at 2.8 percent, which is the rate expected for Croatia in 2018.

However, many countries in the region are likely to post higher figures, with rates of growth 4 percent or more, such as Hungary, Bulgaria, Romania, Slovenia, Turkey, and Slovakia.

This will have a positive effect for the banking sector, Ferrazzi said, and added that the entire sector is now more stable and sustainable than in recent years in terms of loans, financing, and the loan quality.

Loans in the region in 2018 and 2019 will continue to grow at 5 percent per year, and for the first time in a decade, in 2018 the amount of loans is expected to grow faster than deposits. In 2017 the biggest growth in loans was in Turkey (20 percent), Slovakia (9.9 percent), Bosnia and Herzegovina (6.5 percent), and the Czech Republic (5.7 percent).

This year, UniCredit’s analysts said they expected loan growth to ease in those countries, while increasing in countries which have so far lagged behind, such as Croatia and Serbia.

In terms of loan quality, the economic growth in recent years, along with sales of bad loans, has resulted in the reduction of the share of bad loans in overall loans, which affected the profitability of banks in the region. All countries in the region have a bad loan share of under 9 percent, except Russia. UniCredit expects their share to continue falling, with the share dropping to 7 percent in Croatia.

Ferrazzi said that macro-economic and banking fundamentals in the region are very strong today, thanks to the good global environment, and added that considering the good penetration of mobile and online services, favourable demographic trends and digitalisation, the region is on the path to make the best out of digital banking.

UniCredit said the predicted growth in digital banking was supported by their research which examined finance technology companies in the CEE region. In the period from 2012 to 2016 more than 600 such companies were based in the region. Russia hosted the most, at 216, followed by Turkey (101), Bulgaria (70), and the Czech Republic (67). Croatia had 13.

Although more than 90 percent of the companies in the sector are still based in Western Europe, in the CEE region their number is rapidly growing, with over two thirds of them doing business in sectors of transactions and payments, and investments, and that most are doing business outside of their national borders.

Follow N1 via mobile apps for Android | iPhone/iPad | Windows| and social media on Twitter | Facebook.