Information on economic trends (February 2017)

Information on economic trends

February 2017

3CNB • INFORMATION ON ECONOMIC TRENDS • FEBRUARY 2017

Summary

1 Themodelestimateofeconomicgrowthinthelastquarterof2016reflectsastagnationinrealGDPrelativetothepreviousquarterduetotheexceptionallyhighbaseinthethirdquarterwhengrowthwasgreatlysupportedbystrongexportsoftouristservices.

2 Theadjustedunemploymentrateintheperiod,whichusesthepreviouslymentionedCPIAdatainsteadofthedatafromtheJOPPDforminthecalculationoftheunemploymentrate,totalled13.3%(relativeto13.8%inthethirdquarter2016).

Favourable developments in economic activity continued at the end of 2016. Industrial production and exports of goods grew at a fast pace, retail trade turnover increased as well, while the fall in construction activity slowed down. The upward trend in the annual rate of change of consumer prices went on, entering positive territory in December. Monetary developments in 2016 were marked by more intensive lending to domestic sectors than in the previous few years. This was primarily aided by the continued recovery of corporate placements and, to a smaller extent, household placements, which increased for the first time after a seven-year deleveraging period. Data available for the second half of the year indicate that favourable fiscal developments continued during the period so the general government deficit at the annual level might come in much lower than at the same time last year. At the end of October, the general government deficit was much lower than at the end of 2015, primarily due to the favourable impact of the exchange rate.

Afteranoticeableintensificationofeconomicactivityinthethirdquarter,monthlyindicatorssignalledfavourabledevelop-mentsagaininthefourthquarterof2016.1Industrialproduc-tionthusspikedbyahigh6.4%attheendoflastyearrelativetotheaverageinthepreviousthreemonths(Figure3),nearingthelevelsfrombeforetheonsetoftheeconomiccrisis.Brokendownbymainindustrialgroupings,favourablemovementsinindustryareaconsequenceoftheincreaseinproductioninallMIGcom-ponents,withenergyproductionboastingthestrongestgrowth(Figure4).DatagroupedbyNCEAactivityrevealthatindustrialproductiongrewacrosstheboard.Therealretailtradeturnovercontinuedtoincreaseinthelastquarterof2016,growingbyasmuchas1.3%onthepreviousthreemonths(Figure7).Atthesametime,thevolumeindexofconstructionworkscontinuedtofall,althoughataslowerpace.Thiswassupportedbytheinten-sificationintheconstructionactivityofthegeneralgovernmentsector,asindicatedbythestrongriseincivilengineeringworksinNovember(Figures5and6).Asforexpectationsregardingfutureeconomicdevelopments,theresultsofbusinessandcon-sumerconfidencesurveysfromtheendof2016andthebegin-ningofthisyearsuggestacontinuationoffavourabletrendsinbusinessandconsumeroptimism.Consumerexpectationsclear-lyshowanincreaseinconfidence(Figure8).Employmentgrowthacceleratedagaininthefourthquarter

of2016.Thenumberofemployedpersonsincreasedby0.5%fromthepreviousquarter,withemploymentgrowingacrosstheboard.Forthemostpart,however,thisgrowthreflectedthein-creaseinthenumberofpersonsemployedinserviceactivitiesintheprivatesector,althoughthecontributionofindustrywasalsonoticeable(Figure14).Unemploymentcontinued todecreaseduringthesameperiodaswellbutataweaker intensity thanin the firsthalfof2016.Thereduction in thenumberofun-employedpersonswasprimarilyaresultofclearingsfromtherecordsforreasonsotherthanemployment.Theregisteredun-employmentrate,totalling14.1%inthefourthquarterof2016(14.5%inthethirdquarter),continueddecreasinginlinewiththereductionofthenumberoftheunemployed.2ThelatestdatafromtheLabourForceSurveyforthethirdquarter2016alsoconfirmed favourable developments in unemployment so theILOunemploymentrateintheperiodfromJulytoSeptembertotalled11.8%,asagainstthe13.3%inthesecondquarter(Fig-ure15).Asforsalaries,theygrewstronglyattheendoftheyearafteraslightdecreaseinthethirdquarter(Figure16).Atthesametime,realnetsalarieswentdownslightlyduetotheaccel-eratedgrowthofprices.

Attheendof2016,theconsumerpriceinflationenteredpos-itiveterritory,totalling0.2%(Table1).AllmajorCPIcompo-nents(exceptindustrialproducts),butinparticularthepricesoffood(includingalcoholandtobacco)andenergy,contributedtothisinflationgrowth.Theannualcontributionofthepricesoffoodtooverallinflationroseto0.4percentagepointsinDe-cember,whilethenegativecontributionofenergypriceswentdownto–0.2percentagepoints(Figure18).Theincreaseinthepricesofpetroleumproducts inDecember2016reflectedde-velopmentsincrudeoilpricesontheglobalmarket(Figure19).TheaveragepriceofBrentcrudeoilontheglobalmarket in-creasedinDecemberbysome16%fromNovemberduetoex-pectationsthatOPECmembersandotheroil-producingcoun-trieswouldadheretothereducedproductionquotasagreedattheendofNovember2016.TheannualgrowthrateofindustrialproducerpricesdeceleratedduetothestrongseasonalfallinthepricesofclothingandfootwearrelativetoDecember2015.CoreinflationacceleratedslightlyinDecember(to0.5%from0.4%inNovember),primarilyduetotheincreaseintheannualrateofchangeinthepriceofprocessedfoodproducts.Thiswaspre-dominantlyaresultoftheriseinthepricesoftobaccospurredbyhigherexciseduties.Foreign trade figures registered a considerable deficit de-

crease inOctoberandNovemberasaresultof thenoticeablegrowthinexportspairedwithslightlyweakergrowthinimportsthan in the previous quarter average.Total exports, after thenegativeresultsinthepreviousquarter,increasedbyasmuchas11.5%(Figure10),predominantlyduetothegrowthintheex-portsofoilandrefinedpetroleumproducts,whiletheexportsofothertransportequipment(mostlyships)declined.Agrowthintheexportsofthenarrowaggregate(6.7%)wasobservedacrosstheboard.Thiswastrueespeciallyformedicalandpharmaceu-ticalproducts,capitalequipment,electricity,roadvehiclesandindividualfoodproducts.Atthesametime,afterstagnatinginthepreviousquarter,totalimportsofgoodsincreasedby3.4%inOctoberandNovember(Figure11), to thegreatestextentasaconsequenceof therise in the importsofoilandrefinedpetroleumproducts,whilethegrowthinthenarrowaggregate(1.0%)wasspurredbystronger importsofcapitalequipmentandclothing.Theexchangerateofthekunaagainsttheeuromostlyappre-

ciatedinJanuary,endingthemonthatEUR/HRK7.48,down1.0%fromtheendofDecember2016(Figure21).Thekunaweakenedagainstmostothermajortradingpartners’currenciesinJanuary,resultinginanappreciationofthenominaleffective

4 CNB • INFORMATION ON ECONOMIC TRENDS • FEBRUARY 2017

exchange rate of 1.3% compared to the end of the previousmonth.Inadditiontothestrengtheningofthekunaagainsttheeuro, thiswasaidedby theappreciationof thedomesticcur-rencyagainst theyuanrenminbi, theTurkish liraand theUSdollar,whichwasprimarilyaresultofthestrengtheningoftheeuroagainstthementionedcurrenciesintheglobalforeignex-changemarket.At the beginning of 2017, euro benchmark interest rates

were still very low due to the ECB’s expansionarymonetarypolicy.Theovernight interest rate for theeuroarea,EONIA,thusdecreasedslightlyinJanuaryto–0.35%andthesix-monthEURIBORdeclinedto–0.24%(Figure24).TheriskpremiumsforEuropeanemergingmarkets,includingCroatia,continuedtodecreasegraduallyearlyin2017aftertheirtemporaryspikeinNovember2016(Figures24and25).However,Croatia’sriskpremiumremainedthehighestamongitsCEEpeersattheendofJanuary2017.Earlyin2017,thedomesticmoneymarketwasunderthein-

fluenceofstrongliquidityboostedbytheCNB’sexpansionarymonetarypolicy.AftertheCNBcreatedalargeamountofre-servemoneybypurchasingforeigncurrencyfrombanks,theav-eragesurplusliquidityinJanuarygrewtoarecordHRK16.4bnfromHRK9.2bninDecember2016(Figure50).Thiscontrib-utedtoafurtherdeclineintheaverageweightedinterestrateonovernightinterbankloans,whichfellto0.13%(Figure50).Theinterestrateonone-yearkunaT-billswithoutacurrencyclausealsodecreasedinJanuarytoitsall-timelowof0.62%.Interest rateson loansdeclined throughout2016,onboth

corporateloansandhousingloans(Figures28and29).Interestratesoncorporateinvestmentloansindexedtoaforeigncurren-cyfellbymorethanonepercentagepoint,totalling3.5%attheendofDecember(Figure31).Asforhousingloans,therewasanoticeabledeclineininterestratesonhousingloansgrantedforthefirsttimethroughout2016,althoughtheendoftheyearsawaslightincreaseininterestratesonkunahousingloans.Depositratesalsocontinuedtheiryears-longdownwardtrendin2016.Thisisprimarilytrueofinterestratesonnewtimedepositsofhouseholds(Figure34)whichtotalled0.81%inDecember2016andalmosthalvedfromthelevelsseenayearearlier.Thespreadbetweeninterestratesontotalnewloansanddepositsnarrowedslightlyin2016.However,itstillexceededsixpercentagepoints,whilethegapbetweeninterestratespreadsonloansanddepos-itsremainedslightlybelowfivepercentagepoints(Figure37).Monetarydevelopments in2016weremarkedbya strong

growth in net foreign assets (NFA) of the monetary systemandthestagnation innetdomesticassets(NDA)(Figure38)whichresulted intherise intotal liquidassets(M4)of4.7%,or5.3%iftheeffectofexchangeratechangesisexcluded(Fig-ure46).WithinthestructureofM4,thegreatestcontributiontogrowthcamefromtheincreaseinmoney(M1),whosegrowthratereachedasmuchas18.1%attheendof2016(Figure45),spurredparticularlybythegrowthofdemanddeposits.In2016,movements in totalplacementsweremuchmore

favourable thanover thepast fewyears (Figure40).The in-crease in total placements of 1.1% (based on transactions)wassupportedbycontinuedrecoveryinplacementstocorpo-rates(3.1%)andtoasmallerextentbyplacements tohouse-holdswhich,forthefirsttimeinsevenyears,increasedby0.5%(Figures41and42).Ontheotherhand,thenominalvalueofplacementswas3.4%lowerattheendof2016thanattheend

of2015,reflectingapartialwrite-offofloanstohouseholdsin-dexedtotheSwissfranc(HRK6.0bnintheperiodfromNo-vember 2015 to December 2016) and the sale by banks oftheirnon-performingplacements(HRK4.2bninthefirstninemonthsof2016).Asforlendingtothegovernment,bankplace-mentstothecentralgovernmentincreasedby3.0%in2016onanannuallevel(basedontransactions).Gross internationalreservesrosebyEUR1.1bn(8.0%) in

January2017on theendof thepreviousyear, reachingEUR14.6bn(Figure52).Thenoticeable increase ingrossreserveswas predominantly a result of a higher level of agreed repotransactions.Netusablereserveswentuponlyslightly(0.1%),standingatEUR12.2bnattheendofJanuary.NetexternaldebtofdomesticsectorsrosebyEUR0.6bnin

OctoberandNovember(Figure56).TheCNB’scontributiontothisgrowthtotalledEUR0.3bnduetothenarrowingofreservescausedbythecentralgovernmentwithdrawingfundsfromtheforeigncurrencydepositwiththeCNB.Afterintensivedelever-agingoverthesummer,netexternaldebtofcreditinstitutionsincreasedbyEUR0.2bn.Fiscaldataforthethirdquarterof2016undertheESA2010

methodologyreflectacontinuationofthestrongfiscalconsoli-dationfromthefirsthalfofthepreviousyear.Totalgeneralgov-ernmentrevenuesthusincreasedby5.3%intheperiodfromJulytoSeptemberrelativetothesameperiodayearearlier,whileatthesametimeexpendituresincreasedby1%.Brokendownbycategory,ontherevenuesideVATmadeastrongpositivecontri-bution(spurredbyfavourabledevelopmentsintourism),whileontheexpenditureside,theexpectedgrowthinexpensesonem-ployeeswaspairedwithahighincreaseinsubsidies,relativetothesameperiodayearearlier,whichwaspartlyduetoachangeinthepaymentdynamicsacrosstheyear.TheavailableMinistryofFinancedataonacashbasis(GFS

2001methodology)forOctoberindicatethatfiscaladjustmentcontinuedatthebeginningofthelastquarterof2016.Thus,ac-cordingtodataonacashbasisforOctober,revenuesincreasedandexpendituresdecreasedfromthesameperiodayearearlier.Duetounexpectedlygoodresults,amendmentstothestate

budgetandfinancialplansofextrabudgetaryuserswereadopt-edinNovember,andasaresulttheexpecteddeficitofthegen-eralgovernmentbudgetwasmuchreduced.Theimprovementinfiscal indicatorsisalsoreflectedinthereactionsoftwoin-ternational ratingagencies,whichupgraded theiroutlook forCroatia’screditratingfromnegativetostableinDecemberandJanuaryrespectively.TheconsolidatedgeneralgovernmentdebtinOctober2016

waslowerthanattheendof2015(duetofavourablefiscalde-velopmentsbutalsoduetotheappreciationofthekunaagainsttheeuro),thusdecliningtoHRK287.4bn(Figure59).Asforthepublicdebtstructure,2016sawsomepositivechangesintheformofextendeddebtmaturityandthegrowthintheshareofkunadebtinstruments.Inaddition,thegovernmentcontinuedtorefinanceitsliabilitiesatfavourableconditionsthroughoutthesecondhalfoftheyear,maintaininghighliquidity.AfterinterestratesreachedtheirhistoricallowatthelatestkunabondissueinJuly2016,interestratesonT-billsissuedinthethirdandthefourthquartermostlyremainedatexceptionallylowlevelsandremainedatsimilarlevelswhenT-billswereissuedatthebegin-ningof2017.


94

97

100

103

106

–4

–2

0

2

4

Figure 1 Quarterly gross domestic productseasonally adjusted real values

%

2010

= 1

00

Quarterly rate of change of GDP – leftLevel of GDP – right

Note: Data for the fourth quarter of 2016 is the estimate derived using the CNB’s Monthly indicator of real economic activity, on the basis of data published until 2 February 2017.Sources: CBS data seasonally adjusted by the CNB and CNB calculations.

2010 20162011 2012 2013 2014 201570

80

90

100

110

120

130

Figure 4 Industrial production by main industrial groupingsseasonally adjusted indices

Note: Quarterly data are calculated as the average of monthly data. Source: CBS data seasonally adjusted by the CNB.

Intermediate goodsCapital goods

Non-durable consumer goodsDurable consumer goods

2010

= 1

00

Energy

2010 20162011 2012 2013 2014 2015

–6

–4

–2

8

6

–6

–4

–2

8

6

%

0

2

4

0

2

4

Figure 2 GDP rate of changecontribution by components

perc

enta

ge p

oint

s

Imports of goods and services – left Gross fixed capital formation – leftExports of goods and services – left Government consumption – leftChanges in inventories – left Household consumption – leftGross domestic product – right

Note: The projection for 2016 refers to the official projection of the CNB from December 2016.Source: CBS.

2011 2012 2013 2014 20152010 2016

%

88

92

96

100

104

112

–9

–6

–3

0

3

9

6 108

Figure 3 Industrial production

Source: CBS data seasonally adjusted by the CNB.

2010

= 1

00

Quarterly rate of change of seasonally adjusted index – leftTrend-cycle – right

2011 20162010 2012 2013 2014 2015

%

55

70

85

100

115

130

–9

–6

–3

0

3

6

Figure 5 Total volume of construction works

Note: Data for the fourth quarter of 2016 refers to October and November.Source: CBS data seasonally adjusted by the CNB.

Trend-cycle – rightQuarterly rate of change of seasonally adjusted index – left

2010

= 1

00

2010 20162011 2012 2013 2014 2015

–12

12 %

–8

–4

0

4

8

55

70

85

100

115

130

145

Figure 6 Buildings and civil engineering works


2010

= 1

00

Buildings (trend-cycle) – leftCivil engineering works (trend-cycle) – left

Buildings (quarterly rate of change) – rightCivil engineering works (quarterly rate of change) – right

2010 2011 2012 2013 2014 20162015


92

106

104

–4

3

2

%

94

96

98

100

102

–3

–2

–1

0

1

Figure 7 Real retail trade turnover


Trend-cycle – rightQuarterly rate of change of seasonally adjusted index – left

2010

= 1

00

2010 2011 2012 2013 2014 20162015

80

90

100

110

120

130

Figure 8 Business confidence indicatorsstandardised and seasonally adjusted values, three-member moving averages

Construction business confidence indicatorRetail trade business confidence indicator

Industry business confidence indicatorLong-run average = 100

Sources: Ipsos and CNB data seasonally adjusted by the CNB.

Services business confidence indicator CCI consumer confidence index

2010 2011 2012 201720152013 2014 2016

60

120

–30

–20

–10

0

10

75

90

105

Figure 9 EU confidence indicesseasonally adjusted series

Source: Eurostat.

Industrial confidence index – leftConsumer confidence index – leftEconomic Sentiment Index (ESI) – right

long

-run

ave

rage

= 1

00

in %

, bal

ance

of r

espo

nses

2010 2011 2012 20172013 2014 2015 2016

–15

20

–10

–5

0

5

10

15

Note: Data for the fourth quarter of 2016 refer to October and November.Source: CBS data seasonally adjusted by the CNB.

Figure 10 Goods exports (f.o.b.)

billi

on E

UR

in %

, sea

sona

lly a

djus

ted

Total exports (quarterly rate of change) – rightExports excl. ships and oil (quarterly rate of change) – rightTotal exports (trend-cycle) – leftExports excl. ships and oil (trend-cycle) – left

0.4

1.1

2010 2011 2012 20152013 2014 2016

0.5

0.6

0.7

0.8

0.9

1.0

–8

12

–4

0

4

8

Note: Data for the fourth quarter of 2016 refer to October and November.Source: CBS data seasonally adjusted by the CNB.

Figure 11 Goods imports (c.i.f.)bi

llion

EUR

in %

, sea

sona

lly a

djus

ted

Total imports (quarterly rate of change) – rightImports excl. ships and oil (quarterly rate of change) – rightTotal imports (trend-cycle) – leftImports excl. ships and oil (trend-cycle) – left

0.8

1.8

2010 2011 2012 2013 2014 2015 2016

1.0

1.2

1.4

1.6

–30

–20

–10

0

10

20

30

Note: Imports of capital equipment (SITC divisions 71 – 77). Data for the fourth quarter of 2016 refer to October and November.Source: CBS data seasonally adjusted by the CNB.

Figure 12 Imports of capital equipment and roadvehicles (c.i.f.)

billi

on E

UR

in %

, sea

sona

lly a

djus

ted

Imports of road vehicles (quarterly rate of change) – rightImports of capital equipment (quarterly rate of change) – rightImports of road vehicles (trend-cycle) – leftImports of capital equipment (trend-cycle) – left

0.00

0.06

0.12

0.18

0.24

0.30

0.36

2010 2011 2012 20152013 2014 2016


Figure 13 Trade in goods balancethree-member moving averages of monthly data

Source: CBS.

billi

on E

UR

Energy sources Capital goods ShipsRoad vehicles Other Total

–0.9

0.3

2010 2011 2012 2013 2014 2015 2016

–0.6

–0.3

0.0

1320

1350

1380

1410

1440

1470

1500

1530

1560

Sources: CPIA data seasonally adjusted by the CNB.

perc

enta

ge p

oint

s

Figure 14 Employment by NCA activities seasonally adjusted data, contributions to the quarterly rate of change

in th

ousa

nd

2010 2011 2012 20162013 2014 2015

Public sector (O, P, Q) Other Industry (B, C, D, E)Construction (F) Trade (G) Employment – right

–2.4

–2.0

–1.6

–1.2

–0.8

–0.4

0.0

0.4

0.8

%

–1.0

–0.5

0.0

0.5

1.0

1.5

–1.0

–0.5

0.0

0.5

1.0

1.5

2010 2011 2012 2013 2014 2015 2016

perc

enta

ge p

oint

s

Industry (B, C, D, E) Construction (F) Trade (G)Public sector (O, P, Q) Other Nominal gross wage – right

Figure 16 Average nominal gross wage by NCA activitiesseasonally adjusted data, contributions to the quarterly rate of change

Note: Data on the average nominal gross wage by activity refer to data from the RAD-1 form, and from January 2016 to data from the JOPPD form. Data for the fourth quarter of 2016 refer to October and November. Sources: CBS and CNB calculations (seasonally adjusted by the CNB).

8

10

12

14

16

18

20

22%

2010 2011 2012 2013 2014 2015 2016

Registered unemployment rate Adjusted unemployment rateILO unemployment rate

Figure 15 Unemployment ratesseasonally adjusted data

Note: Since January 2015, the calculation of the registered unemployed rate has been made using the data on employed persons from the JOPPD form. The adjusted unemployment rate is the CNB estimate and is calculated as the share of the number of registered unemployed persons in the working age population (unemployed persons and persons insured with the CPIA). Data on the registered unemployed rate in the fourth quarter of 2016 refer to October and November.Sources: CBS and CNB calculations (seasonally adjusted by the CNB).

–2

–1

0

1

2

3

4

5

6

Figure 18 Year-on-year inflation rates and components’ contribution to consumer price inflation

a Core inflation does not include agricultural product prices and administrative prices.Sources: CBS and CNB calculations.

perc

enta

ge p

oint

s

Energy Unprocessed foodProcessed food Non-food industrial goods without energyServices Core inflation (%)a

Consumer price index (%)

2010 2011 2012 201620142013 2015

%

–8

–4

0

4

8

12

16

Figure 17 Consumer price index and core inflationannualised month-on-month rate of changea

a The month-on-month rate of change is calculated based on the quarterly moving average of seasonally adjusted consumer price indices.Sources: CBS and CNB calculations.

Consumer price index Core inflation

2010 2011 2012 201620142013 2015


20

70

80

90

100

110

120

130

150

250

350

450

550

650

750

850

60

50

40

30

Figure 19 Crude oil prices (Brent)

Sources: Bloomberg and CNB calculations.

Brent (USD/barrel) – left Brent (HRK/barrel) – right

USD/

barr

el

HRK/

barr

el

2010 2011 2012 201620142013 2015

80

200

90

100

110

120

130

140

150

160

170

180

190

Figure 20 HWWI index (excl. energy)

Sources: HWWI and CNB calculations.

2015

= 1

00

HWWI index (USD) HWWI index (HRK)

2010 2011 2012 201620142013 2015

Figure 21 Daily nominal exchange rate – HRK vs. EUR, USD and CHFCNB midpoint exchange rate

Source: CNB.

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

EUR/HRK – left USD/HRK – right CHF/HRK – right

4.5

5.0

5.5

6.0

6.5

7.0

8.0

7.5

2010 2017201420122011 2013 2015 2016

140

90

100

110

120

130

Figure 22 Nominal and real effective exchange ratesof the kuna

Note: The real effective exchange rate of the kuna deflated by producer prices includes the Croatian index of industrial producer prices on the non-domestic market, which is available from January 2010. The unit labour cost is calculated as the ratio between compensation per employee and labour productivity (defined as GDP per person employed), while the real effective exchange rate of the kuna deflated by unit labour costs is the result of the interpolation of quarterly values. A fall in the index indicates an effective appreciation of the kuna.Source: CNB.

NominalReal (CPI)Real (PPI)

Real (ULC total economy)

inde

x, 2

010

= 1

00

Real (ULC manufacturing)

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2017

2014

2013

2015

2016

Figure 23 Contributionsa of individual currencies to the monthly rate of change of the average index of the nominal effective kuna exchange rate (INEER)

a Negative values indicate contributions to the appreciation of the INEER.Source: CNB.

perc

enta

ge p

oint

s

EUR USD CHF Other currencies INEER (%)

–2.0

–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

–1.5

2010 2011 2012 201720142013 2015 2016

Table 1 Price indicatorsyear-on-year and month-on-month rates of change

Year-on-year rates

Month-on-month rates

11/16 12/16 12/15 12/16

Consumer price index and its components

Total index –0.2 0.2 –0.6 –0.2

Energy –2.9 –1.1 –0.6 1.2

Unprocessed food –0.1 1.7 –0.3 1.5

Processed food (incl. alcoholic drinks and tobacco)

0.5 1.0 –0.5 0.0

Non-food industrial goods without energy

0.9 0.2 –1.5 –2.2

Services –0.2 –0.1 0.1 0.2

Other price indicators

Core inflation 0.4 0.5 –0.7 –0.6

Index of industrial producer prices on the domestic market

–3.1 –0.1 –1.4 1.7

Brent crude oil price (USD) 4.5 43.3 –15.1 16.4

HWWI index (excl. energy)a 20.0 25.6 –2.3 2.2a The index is calculated on the basis of raw materials prices expressed in US dollars.Sources: CBS, Bloomberg and HWWI.


%

–100

0

100

200

300

400

500

Figure 24 Interest rates on the euro and the average yield spread on bonds of European emerging market countries

Sources: ECB, Bloomberg and J. P. Morgan.ba

sis

poin

ts

ECB benchmark rate – left EONIA – left 6M EURIBOR – leftEMBI spreads for European emerging market countries – right

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

2010 2011 2012 2013 2014 2015 20172016

0

100

200

300

400

500

600

700

800

Figure 25 CDS spreads for 5-year government bonds of selected countries

Note: Credit default swaps (CDS) spread is an annual premium that a CDS buyer pays for protection against credit risk associated with an issuer of an instrument.Source: S&P Capital IQ.

basi

s po

ints

CroatiaPoland

Czech R.BulgariaRomania Slovenia

HungarySlovak R.

ItalyGermany

2010 2011 2012 2013 2014 20172015 2016

0

100

200

300

400

500

600

700

Unicredit S.p.A. Société GénéraleErste Group Bank AGIntesa Sanpaolo S.p.A.

Raiffeisen Bank International AG

Figure 26 CDS spreads for selected parent banks of domestic banks

basi

s po

ints

Source: S&P Capital IQ.

2010 2011 2012 2013 2014 2015 2016 2017

%

0

1

2

3

4

5

6

Figure 27 Interest rates quoted on the interbank market (3 month ZIBOR) monthly averages of simply daily averages of bank quotations

Source: CNB.

2010 2011 2012 2013 2014 20172015 2016

%

0

2

4

6

8

10

12

14

Figure 28 Short-term financing costs in kuna without a currency clause

Sources: MoF and CNB.

364-day T-bills (HRK)Short-term kuna corporate loans without a currency clauseShort-term kuna household loans without a currency clause

2010 2011 2012 2013 2014 20172015 2016

%

0

2

4

6

8

10

12

14

Figure 29 Long-term financing costs in kuna with a currency clause and in foreign currency

Note: EMBI, or the Emerging Market Bond Index, shows the spread between yieldson government securities of emerging market economies, Croatia included, andrisk-free securities issued by developed countries.Sources: MoF, Bloomberg and CNB.

Long-term corporate loans with a currency clause546/547-day T-bills (EUR, indexed to f/c) 455-day T-bills (EUR, indexed to f/c)Long-term housing loans to households with a currency clauseYield on generic 10-year German bond + EMBI CroatiaLong-term household loans with a currency clause, excl. housing loans

2010 2011 2012 2013 2014 20172015 2016


0

2

4

6

8

2012 2013 2014 2015 2016

NIR

on n

ew lo

ans,

in %

Figure 30 Bank interest rates on loans to non-financialcorporations by volume

Source: CNB.

Interest rate spread between loans up to HRK 7.5m and loans over HRK 7.5m

Loans up to HRK 7.5m Loans over HRK 7.5m

3

5

7

9%

2015 2016

Figure 31 Interest rates on original new loans to non-financial corporations

Source: CNB.

Working capital loans in kunaWorking capital loans in kuna indexed to f/cInvestment loans in kuna indexed to f/c Revolving loans, overdrafts and credit card credit in kuna

%

2015 2016

Figure 32 Interest rates on original new housing loans to households

Source: CNB.

Housing loans in kuna Housing loans in f/cTotal housing loans

3.5

4.0

4.5

5.0

5.5

%

6

7

8

9

10

2015 2016

Consumer loans in kuna Consumer loans in f/cTotal consumer loans Other loans

Figure 33 Interest rates on original new consumer and other loans to households

Note: Consumer loans include total loans to households excl. housing and other loans. Other loans to households (denominated almost exclusively in kuna) include credit card loans, overdrafts, revolving loans and receivables on charge cards.Source: CNB.

2012 2013 2014 2015 2016

Figure 34 Interest rates on household time deposits

Source: CNB.

Short-term household time deposits in kuna

Long-term household time deposits in kunaShort-term household time deposits in f/c

Long-term household time deposits in f/cTotal household time deposits

0

1

2

3

4

5%

2012 2013 2014 2015 2016

Figure 35 Interest rates on corporate time deposits

Source: CNB.

Short-term corporate time deposits in kuna

Long-term corporate time deposits in kunaShort-term corporate time deposits in f/c

Long-term corporate time deposits in f/cTotal corporate time deposits

%

0

2

4

6

8


%

0

2

4

6

8

10

2012 2013 2014 2015 2016

Figure 36 Average interest rates on loans (excl. revolving loans) and deposits

a For time deposits, interest rates on newly received deposits are weighted by their balances.Source: CNB.

Loans – balances Loans – newDeposits – balances Deposits – newa

%

3

5

7

9

2012 2013 2014 2015 2016

Figure 37 Spread between interest rates on loans (excl. revolving loans) and interest rates on deposits

a Non-indexed to f/c. b Indexed to f/c.Note: Spread between average interest rates on loans and average interest rates on deposits should be differentiated from net interest margin (the ratio of the difference between interest income and interest expenses to total assets of credit institutions).Source: CNB.

Loans in kunaa – Deposits in kunaa

Loans in kunab – Deposits in f/cTotal – newTotal – balances

–20

–10

010

20

30

Source: CNB.

Figure 38 Net foreign assets, net domestic assets and totalliquid assets (M4)absolute change in the last 12 months

billi

on H

RK

Net foreign assets Net domestic assets M4

2010 2011 2012 201620152013 2014

–30

–10

0

10

20

30

–20

Source: CNB.

Figure 39 Net domestic assets, structureabsolute change in the last 12 months

billi

on H

RK

Net placements to the government Placements

Other net assets Net domestic assets

2010 2011 2012 201620152013 2014

–3

2

3

1

–15

–10

0

5

–5

15

10

–1

0

%

–2

Figure 40 Placements bi

llion

HRK

Year-on-year rate of change (transaction-based) – right

Transactions in total placements – leftYear-on-year rate of change (balance-based) – right

Source: CNB.

2010 2011 2012 201620152013 2014

–2

–1

0

1

2 %

–16

–8

–4

0

4

8

12

16

–12

Figure 41 Placements to corporates

billi

on H

RK

Source: CNB.

2010 2011 2012 201620152013 2014


Transactions in corporate placements – leftYear-on-year rate of change (balance-based) – right


%

–10

10

–5

0

5

Figure 42 Placements to householdsbi

llion

HRK

Source: CNB.

2010 2011 2012 201620152013 2014


Transactions in household placements – leftYear-on-year rate of change (balance-based) – right

–1.0

1.0

–0.5

0.0

0.5

0

50

100

150

200

250

300

350

Figure 43 Structure of credit institution placements

Source: CNB.

billi

on H

RK

Placements to other sectorsPlacements to the central governmentPlacements to householdsPlacements to corporates

2010 2011 2012 2013 2014 2015 2016

%

–10

–5

0

5

10

15

20

25

40

0

10

20

30

40

50

60

70

100

80

90 35

30

Figure 44 Credit institution and MMF placements to thecentral government

Source: CNB.

billi

on H

RK

Year-on-year rate of change – rightPlacements to the central government (balance) – left

2010 2011 2012 201620152013 2014

%

–16

–8

–4

0

4

8

12

16

24

20

–12

35

40

45

50

55

60

65

70

75

80

85

Figure 45 Money (M1)

Source: CNB.

billi

on H

RK

Year-on-year rate of change – rightM1 (balance) – left

2010 2011 2012 201620152013 2014

%

–6

–3

0

3

6

9

12

15

21

18

220

310

230

240

250

260

270

280

290

300

Source: CNB.

Figure 46 Total liquid assets (M4)bi

llion

HRK

Year-on-year rate of change (balance-based) – rightYear-on-year rate of change (transaction-based) – rightM4 (balance) – left

2010 2011 2012 201620152013 2014

0

320

40

80

120

160

200

240

280

Figure 47 Structure of M4 monetary aggregate

Source: CNB.

billi

on H

RK

M1 Kuna deposits Foreign currency depositsBonds, money market instruments and MMFs shares/units

2010 2011 2012 2013 2014 2015 2016


Table 2 Balance of paymentsa

preliminary data, in million EUR

2015Jan. –

Sep. 2015

Jan. – Sep. 2016

Indices

2015/ 2014

Jan. – Sep. 2016/

Jan. – Sep. 2015

Current account 2,236.2 2,695.1 1,923.1 246.8 71.4

Capital account 310.6 161.7 304.2 442.0 188.2

Financial account (excl. reserves)

1,161.3 1,339.5 2,244.6 116.7 167.6

International reserves

745.3 550.5 –694.6 – –

Net errors and omissions

–640.1 –966.8 –677.4 125.2 70.1

a In line with the 6th edition of the Balance of Payments and International Investment Position Manual (BPM6).Source: CNB.

%

20

30

35

40

25

–30

–15

0

15

30

Figure 48 Kuna savings and time deposits

Source: CNB.

billi

on H

RK

Year-on-year rate of change – rightKuna deposits (balance) – left

2010 2011 2012 201620152013 2014

%

–5

0

5

10

15

20

80

100

120

140

160

180

Source: CNB.

Figure 49 Foreign currency deposits

billi

on H

RK

Year-on-year rate of change (balance-based) – rightYear-on-year rate of change (transaction-based) – rightForeign currency deposits (balance) – left

2010 2011 2012 201620152013 2014

0

18%

3

6

9

12

15

Figure 50 Bank liquidity and overnight interbank interest rate

Note: Liquidity surplus is the difference between the balance in bank settlementaccounts with the CNB and the amount that banks are required to hold in theiraccounts after the calculation of reserve requirements.Source: CNB.

billi

on H

RK

Liquidity surplus (incl. overnight deposits with the CNB) – rightOvernight interbank interest rate – left

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2010 2011 20172015201420132012 2016

8

9

10

11

13

16

12

14

15

Figure 52 International reserves of the CNBat current rate of exchange

billi

on E

UR

a NUIR = international reserves – foreign liabilities – reserve requirements in f/c – foreign currency government deposits.Source: CNB.

International reserves Net usable international reservesa

2010 2011 2012 2013 201720152014 2016

Figure 51 Spot transactions in the foreign exchange market(net turnover)

billi

on E

UR

Bank transactions with legal persons Bank transactions with natural personsBank transactions with foreign banks Bank transactions with the CNB

CNB transactions with government and the ECTotal bank transactions

–2.5

–0.5

0.0

0.5

1.0

1.5

2.0

–1.0

–1.5

–2.0

Note: Positive values indicate net purchases and negative values indicate net sales.Legal persons include the government. Data for the first quarter of 2017 refers to January.Source: CNB.

2010 2011 2012 201720152013 2014 2016


–4

–2

0

8

4

2

–4

–2

0

2

4

8

66

Figure 53 Current and capital account flows

a Sum of the last four quarters.Source: CNB.

billi

on E

UR

as %

of G

DP

Secondary income – left Services – leftPrimary income – left Goods – left

2010 2011 2012 201620152013 2014

Current and capital accounta – rightCurrent and capital account excl. the effect of conversiona – right

Capital transactions – left

–8

–6

–4

–2

0

4

6

2

–3

–2

–1

0

1

2

4

3

Figure 54 Financial account flows by type of investment

Note: A positive value indicates net outflow of equity abroad (including on the basis of the growth in international reserves). Total net capital flow series are shown as a four-quarter moving average.Source: CNB.

billi

on E

UR

as %

of G

DP

Change in international reserves – leftOther investment – leftPortfolio investment – leftDirect investment – left

Total net flows – right

2010 2011 2012 201620152013 2014

Financial derivatives – left

–9

12

–3

–2

–1

0

1

2

4

3

–6

–3

0

3

6

9

Figure 55 Financial account flows by capital structure

Note: A positive value indicates net outflow of equity abroad (including on the basis of the growth in international reserves). Total net capital flow series are shown as a four-quarter moving average.Source: CNB.

billi

on E

UR

as %

of G

DP

2010 2011 2012 201620152013 2014

Change in international reserves – left Debt liabilities, net excl. the change in international reserves – leftEquity liabilities, net – left

Total net capital flows excl. the change in international reserves – rightTotal net capital flows – right

–2

0

1

2

3

–1

–4

–3

Figure 56 Net external debt transactions

billi

on E

UR

General government Croatian National Bank Other MFIsOther sectors Direct investment Total

Note: Transactions refer to the change in debt excl. cross-currency changes and other adjustments. Net external debt is calculated as gross external debt stock net of foreign debt claims. Data for the fourth quarter of 2016 refer to October and November.Source: CNB.

2010 2011 2012 201620152013 2014

–3

–2

0

1

2

–1

Figure 57 Gross external debt transactions

Note: Transactions refer to the change in debt excl. cross-currency changes andother adjustments. Data for the fourth quarter of 2016 refer to October and November.Source: CNB.

billi

on E

UR

General government Croatian National Bank Other MFIsOther sectors Direct investment Total

2010 2011 2012 201620152013 2014

0

10

20

30

40

50

Figure 58 Gross external debtend of period

Source: CNB.

billi

on E

UR

General government Croatian National Bank Other MFIsOther sectors Direct investment

2010 2011 2012 2013 2014 2015 2016


Table 4 Consolidated central government net borrowingGFS 2001, in million HRK

Jan. – Oct. 2015

Jan. –Oct. 2016

1 Revenue 104,763 113,442

2 Disposal of non-financial assets 408 94

3 Expenditure 108,552 109,854

4 Acquisition of non-financial assets 3,520 3,221

5 Net borrowing (1 + 2 – 3 – 4) –6,902 461

Sources: MoF and CNB calculations.

Table 5 General government debtin million HRK

Jan. –Oct. 2015

Jan. –Oct. 2016

Change in total debt stock 4,011 –2,130

Change in domestic debt stock 4,471 7,432

– Securities other than shares, short-term –5,092 –1,105

– Securities other than shares, long-term 9,230 14,323

– Loans 333 –5,786

Change in external debt stock –460 –9,562

– Securities other than shares, short-term –577 –49

– Securities other than shares, long-term 3,461 –8,445

– Loans –3,344 –1,068

Memo item:

Change in total guarantees issued –794 1,647

Source: CNB.

Table 3 Consolidated general government balanceESA 2010, in million HRK

Jan. – Sep. 2015

Jan. – Sep. 2016

Total revenue 108,293 118,822

Direct taxes 13,745 15,624

Indirect taxes 49,588 53,223

Social contributions 29,642 30,430

Other 15,318 19,545

Total expenditure 116,876 118,872

Social benefits 40,772 41,116

Subsidies 4,437 5,425

Interest 8,921 8,701

Compensation of employees 28,247 29,072

Intermediate consumption 20,039 19,094

Investment 7,861 7,980

Other 6,600 7,483

Net lending (+)/borrowing (–) –8,583 –51

Sources: Eurostat and CBS.

0

20

40

60

80

100

0

10

20

30

40

50

60

70

80

90

100

5865

71

8287 87 84

2010 2011 2012 2013 2014 2015 10/2016

as %

of G

DP

shar

e in

gen

eral

gov

ernm

ent d

ebt,

in %

External general government debt – leftDomestic general government debt – left

General government debt – right SGP reference value (60%)

Figure 59 General government debt

Note: Nominal GDP for the last four available quarters was used for the calculation of the relative indicator.Source: CNB.


Abbreviations and symbols

Abbreviations

BIS –BankforInternationalSettlementsbn –billionb.p. –basispointsBOP –balanceofpaymentsc.i.f. –cost,insuranceandfreightCBRD –CroatianBankforReconstructionandDevelopmentCBS –CentralBureauofStatisticsCCI –consumerconfidenceindexCDCC –CentralDepositoryandClearingCompanyInc.CDS –creditdefaultswapCEE –CentralandEasternEuropeanCEFTA –CentralEuropeanFreeTradeAgreementCEI –consumerexpectationsindexCES –CroatianEmploymentServiceCM –CroatianMotorwaysCIHI –CroatianInstituteforHealthInsuranceCLVPS –CroatianLargeValuePaymentSystemCNB –CroatianNationalBankCPF –CroatianPrivatisationFundCPI –consumerpriceindexCPIA –CroatianPensionInsuranceAdministrationCR –CroatianRoadsCSI –consumersentimentindexDAB –StateAgencyforDepositInsuranceandBankReso-

lutiondep. –depositDVP –deliveryversuspaymentEC –EuropeanCommissionECB –EuropeanCentralBankEFTA –EuropeanFreeTradeAssociationEMU –EconomicandMonetaryUnionESI –economicsentimentindexEU –EuropeanUnionexcl. –excludingf/c –foreigncurrencyFDI –foreigndirectinvestmentFed –FederalReserveSystemFINA –FinancialAgencyFISIM –financialintermediationservicesindirectlymeasuredf.o.b. –freeonboardGDP –grossdomesticproductGVA –grossvalueaddedHANFA –CroatianFinancialServicesSupervisoryAgencyHICP –harmonisedindexofconsumerpricesILO –InternationalLabourOrganizationIMF –InternationalMonetaryFundincl. –includingIPO –initialpublicofferingm –millionMIGs –mainindustrialgroupingsMM –monthlymaturityMoF –MinistryofFinanceNCA –NationalClassificationofActivitiesNCB –nationalcentralbankNCS –NationalClearingSystem

n.e.c. –notelsewhereclassifiedOECD –OrganisationforEconomicCo-OperationandDe-

velopmentOG –OfficialGazetteR –Republico/w –ofwhichPPI –producerpriceindexRTGS –Real-TimeGrossSettlementQ –quarterlyRR –reserverequirementSDR –specialdrawingrightsSITC –StandardInternationalTradeClassificationSGP –StabilityandGrowthPactVAT –valueaddedtaxWTO –WorldTradeOrganizationZMM –ZagrebMoneyMarketZSE –ZagrebStockExchange

Three-letter currency codes

ATS –AustrianschillingCHF –SwissfrancCNY –YuanRenminbiDEM –GermanmarkEUR –euroFRF –FrenchfrancGBP –poundsterlingHRK –CroatiankunaITL –ItalianliraJPY –JapaneseyenUSD –USdollar

Two-letter country codes

BG –BulgariaCZ –CzechR.EE –EstoniaHR –CroatiaHU –HungaryLV –LatviaLT –LithuaniaPL –PolandRO –RomaniaSK –SlovakR.SI –Slovenia

Symbols

– –noentry.... –datanotavailable0 –valueislessthan0.5oftheunitofmeasurebeing

used∅ –averagea,b,c,... –indicatesanotebeneaththetableandfigure* –correcteddata() –incompleteorinsufficientlyverifieddata

Documents

Information on economic trends (February 2017)