Information on economic trends (March 2019)

Information on economic trends

March 2019

3CNB • INFORMATION ON ECONOMIC TRENDS • MARCH 2019

Summary

In the last quarter of 2018, real GDP held steady at the previous quarter’s level, its annual growth rate slowing down to 2.3%. The stagnation in economic activity was the result of a combination of a decline in exports with strengthened domestic demand. The annual consumer price inflation fell from 0.8% in December to 0.2% in January, mostly driven by prices of unprocessed food products and energy. In early February, the CNB alleviated the appreciation pressures on the kuna/euro exchange rate by purchasing foreign exchange from banks. However, total foreign exchange transactions of the CNB had a small negative monetary effect due to a considerable sale of foreign exchange to the Ministry of Finance. Kuna liquidity of domestic credit institutions held steady at a very high level. Corporate and household placements continued to grow on an annual level. The net external debt of the domestic sectors rose slightly in the fourth quarter, after strong deleveraging in the third quarter. According to MoF data, the central government ran a surplus throughout 2018. However, the surplus does not include outlays for activated shipyard guarantees. In accordance with the ESA 2010 methodology, these outlays will be included in general government expenditures and will worsen the budget balance.

According to the CBS first estimate, in the last quarter of 2018, real GDP held steady on a quarterly level, after signs of slowdown in the third quarter. At the end of last year, the an-nual growth rate of real GDP fell to 2.3% from 2.6% through-out 2018 (Figure 1). Such developments were mostly associated with a continued weakening of foreign demand. Despite a rise in services exports in the fourth quarter from the previous three-month period, this was not sufficient to compensate for the fall in goods exports. By contrast, domestic demand rose at the end of last year. The growth in personal consumption accelerated, the annual rate of growth reaching 3.9%. The strengthening of household consumption may be associated with continued fa-vourable developments in the labour market, heavier household borrowing and a high level or consumer optimism. At the same time investment activities heightened, probably partly as a re-sult of bigger general government investments. Strong domes-tic demand spurred further goods and services imports which, coupled with poor export results, led to a strong negative con-tribution being made by net foreign demand to total economic growth.

The results of the Consumer Confidence Survey show that consumer confidence continued to rise in February 2019. The consumer confidence index on a quarterly level reached the highest level ever, with rising optimism as regards the economic situation in Croatia and the financial situation of households in the following year and better expectations regarding unemploy-ment. As regards business confidence, the upward trend in op-timism in the construction activity, present since 2014, contin-ued, reaching the highest level ever. In January and February this year, the trade confidence index rose considerably from the end of 2018, mostly as a result of much better expectations re-garding sales in the next three months, and returned to the aver-age level in the first half of the year. Expectations also improved in industry, reaching a relatively high level, as a result of expec-tations of rising production in the following three months, while the services confidence index held steady at a level similar to that in the previous quarter (Figure 8).

The favourable developments in the labour market contin-ued into early 2019, although at a somewhat slower pace than at the end of 2018. In January, the total number of employed persons rose by 0.3% from the previous quarter. The number of employed persons rose in most activities, except in public ad-ministration and defence and compulsory social insurance, fi-nancial activities and insurance activities and trade. The increase in the number of employed persons in other service activities and in construction made a significant contribution to total em-ployment growth (Figure 14). Unemployment continued to fall, slightly more as a result of clearings from the records for reasons other than employment (non-compliance with legal provisions,

registration cancellation and failure to report regularly) than of employment from the CES register. Registered unemployment (according to seasonally adjusted data for January 2019) fell to 8.6% from 8.9% in the fourth quarter of 2018 (Figure 15). In January, nominal gross wages rose by 1.3% from the previous quarter, after having stagnated in the last quarter of 2018. Pri-vate sector wages grew faster (1.6%) than public sector wages (0.4%, Figure 16).

In January 2019, consumer prices fell by 0.9% from the previous month (Table 1). The key contributor to this was the seasonal fall in the prices of clothing and footwear. A decline in the prices of certain food products (meat and fruit by 1.7% and 2.3%, respectively) and pharmaceutical products (over-the-counter medicines) by 3.3%, as a result of a reduction in the value added tax on these products, from 25% to 13% and 5%, respectively, made a considerable contribution to the monthly fall in consumer prices. The prices of some food products sub-ject to a reduced VAT rate since January (fish and vegetables) rose slightly from December, in contrast with faster growth in these prices in the previous years as a result of the usual season-al factors. January saw a fall in the prices of refined petroleum products on the domestic market, reflecting the fall in the prices of crude oil on the global market in December (Figure 19). However, the downward trend in crude oil prices present on the world market in the previous two and a half months came to a halt in January, with the price of a barrel of Brent crude oil rising by approximately 15% (from USD 53 at the end of December to USD 61 at the end of January), which could be reflected in developments in inflation in the coming months. This was due to a slowdown in production growth of this energy product in the USA, the agreement among OPEC countries and other ma-jor oil producers and political turmoil in Venezuela. The annual overall consumer price inflation rate slowed down from 0.8% in December to 0.2% in January (Figure 18). If analysed by the main CPI groups, the largest contribution to the fall in the an-nual inflation rate was made by the prices of unprocessed food products (meat, fruit and vegetables) and energy (petroleum products). The annual rate of core inflation also slowed down, from 1.0% in December to 0.6% in January, mostly as a result of a decline in the annual rate of change in the prices of meat and pharmaceutical products.

According to the first results of foreign trade in goods, nomi-nal exports were unchanged in the fourth quarter from the pre-vious quarter while imports rose additionally. Detailed data on trade in goods are only available for October and November and they show that in these two months exports grew by 4.5% from the previous three months’ average (Figure 10), mostly as a re-sult of growth in the exports of the narrow aggregate, which ex-cludes energy products (3.7%). This was mostly due to greater

4 CNB • INFORMATION ON ECONOMIC TRENDS • MARCH 2019

exports of chemical and food products and metal industry prod-ucts, while exports of other transport equipment (mostly ships) fell considerably. Total goods imports rose by 6.8% from the previous three months’ average (Figure 11), mostly influenced by a growth in the imports of the narrow aggregate (5.7%). Par-ticularly strong was the growth in imports of capital goods (Fig-ure 12), mostly industrial products and power generating ma-chinery and equipment and electrical machinery, apparatus and appliances. The imports of chemical products and road vehicles also rose considerably.

A slight depreciation of the exchange rate of the kuna against the euro in January 2019 was followed by appreciation pressures in early February. To prevent excessive strengthening of the do-mestic currency, the CNB intervened strongly in the foreign ex-change market, purchasing EUR 450.3m from the banks on 6 February. After that the exchange rate of the kuna against the euro stabilised and then slightly depreciated in the second half of the month. At the end of February, the exchange rate stood at EUR/HRK 7.43, only slightly higher than at the end of January when it stood at EUR/HRK 7.42 (Figure 21). The kuna weak-ened slightly also against most of Croatia’s other major trading partners’ currencies in February, resulting in a depreciation of the nominal effective exchange rate index of 0.2% compared to the end of January.

On the European money market, short-term interest rates re-mained in negative territory in early 2019. The overnight inter-bank interest rate for the euro area, EONIA, ended February at –0.37%, while the six-month EURIBOR stood at –0.23% (Fig-ure 24). Risk premiums for European emerging market econ-omies, Croatia included, did not change much in early 2019 (Figure 25). At the end of February 2019, the risk premium for Croatia stood at 95 basis points, remaining higher than premi-ums for Central and Eastern European peer countries (Romania excluded).

Kuna liquidity of domestic credit institutions held steady at the very high level of HRK 33.0bn in February. A total of HRK 3.3bn was created in February by purchases of foreign exchange from the banks; however, total foreign exchange transactions of the CNB had a small negative monetary effect due to a consider-able sale of foreign exchange to the Ministry of Finance. Amid such conditions, no turnover has been recorded on the domes-tic interbank overnight market since July 2018 (Figure 54). The Ministry of Finance held T-bill auctions in January and Febru-ary, placing one-year kuna T-bills at an unchanged interest rate still below 0.1% (Figure 28). In addition to issuing kuna T-bills, the government partly refinanced EUR 1.5bn worth of maturing T-bills by a new 455-day issue of EUR 1.1bn at 0.00% interest rate or 0.1 percentage points below the November 2017 issue.

The interest rates on new bank loans to non-financial cor-porations and households generally continued to move favour-ably in early 2019 (Figures 28 and 29). Lower interest rates on original new corporate loans, particularly on loans for working capital with a currency clause contributed to this (Figure 31). In January 2019, the interest rates on original new housing and consumer credit fell slightly (Figures 32 and 33). The interest rates on deposits also fell noticeably at the beginning of the year. This refers in particular to interest rates on household time de-posits which reached their lowest ever levels in January (Figure 34). The spread between interest rates on total new loans and deposits rose, while the spreads between interest rates on loans and deposits remained almost unchanged (Figure 37).

Monetary developments in January 2019 were marked by a considerable fall in net foreign assets (NFA) of credit institu-tions, only partly offset by a rise in net domestic assets (NDA) of the monetary system as a result of a growth in net claims on the central government. As a result of such developments, total liquid assets (M4) fell by HRK 2.5bn or 0.8% in January 2019. Observed on an annual level, the growth in total liquid assets (M4) accelerated slightly to 6.2% in January, excluding the ef-fects of exchange rate changes (Figure 49). As regards the struc-ture of M4, the annual fall in quasi-money slowed down slightly (excluding the effects of exchange rate changes), while the an-nual growth in money (M1) slowed down and stood at 20.1% (Figure 48).

Total placements of monetary institutions to domestic sec-tors (excluding the government) increased in January (transac-tion-based) by HRK 0.4bn, with their annual growth rate up to 4.9% (Figure 40). The annual growth in placements to non-fi-nancial corporations and households stood at 2.5% (Figure 41) and 6.4% (Figure 42), respectively. The relatively fast growth in household placements was spurred by a further annual rise in general-purpose cash loans (12.5%) and housing loans (3.9%). In terms of currency structure, the share of kuna placements in total household placements continued to grow, reaching 52.1% at the end of January (Figure 47). As for the nominal stock of placements, their annual growth stood at 3.3% in January and was significantly slower than the transaction-based growth, pri-marily as a result of the sale of non-performing placements.

Gross international reserves rose in January and February and at the end of February they stood at EUR 18.9bn (Figure 56), mostly influenced by purchases of foreign exchange from the banks. Gross reserves rose by EUR 1.5bn or 8.6% from the end of the previous year. Net usable international reserves re-mained almost unchanged from the end of the previous year and at the end of February they stood at EUR 15.9bn.

Following a sharp decline in the third quarter, the net ex-ternal debt of domestic sectors rose by EUR 0.4bn in the last quarter of 2018 (Figure 60). This was mainly the result of a fall in foreign assets, while the foreign liabilities ofdomestic sectors fell additionally (Figure 61). Observed by domestic sectors, the increase in total net foreign liabilities was primarily due to a de-terioration in the net foreign position of credit institutions (EUR 2.2bn). However, this deterioration was accompanied by an in-ternational reserve accumulation, which resulted in an improve-ment in the external position of the central bank of EUR 1.1bn. The net external debt of other domestic sectors, particularly pri-vate non-financial corporations to affiliated creditors and the debt of the general government sector fell additionally in the fourth quarter. If observed throughout the year, the intensity of the decline in the total net debt of the domestic sectors lessened only slightly from the previous year, with a noticeable improve-ment in the net external position of all the domestic sectors, ex-cept the banks, the leveraging of which came to a halt. The rela-tive indicators show that the gross external debt fell to 75.1% of GDP at the end of 2018 and the net external debt to 23.4% of GDP, a decrease of approximately 7 and 8 percentage points, respectively, from the end of 2017.

According to monthly data of the Ministry of Finance1 in December 2018, the central government ran a deficit of HRK 5.4bn, an increase of HRK 0.6bn from the last month of 2017. Due to a faster annual growth in revenues than expenditures, a surplus of HRK 0.9bn was generated at the level of the whole

1 Monthly data for central government, state government and social security sub-sectors which, pursuant to Council Directive 2011/85/EU, have to be published before the end of the following calendar month. The published data refer to general government units according to the scope of the ESA 2010 statistical method-ology, except for data for the local government, which are published on a quarterly basis.


–4

–2

0

2

6

4

92

96

100

104

108

112

Figure 1 Quarterly gross domestic productseasonally adjusted real values

%

2010

= 1

00

Year-on-year rate of change of GDPLevel of GDP (seasonally adjusted values) – right

Sources: CBS data seasonally adjusted by the CNB and CNB calculations.

2011 20182012 2013 2014 2015 2016 2017

–6

–4

–2

8

6

–6

–4

–2

8

6

%

0

2

4

0

2

4

Figure 2 GDP rate of changecontributions by components

perc

enta

ge p

oint

s

Imports of goods and services Gross fixed capital formationExports of goods and services Government consumptionChanges in inventories Household consumptionGross domestic product – right

Source: CBS.

2012 2013 2014 20152011 20182016 2017

%

88

92

96

100

104

112

–9

–6

–3

0

3

9

1086

Figure 3 Industrial production

Source: CBS data seasonally adjusted by the CNB.

2015

= 1

00

Quarterly rate of change of seasonally adjusted indexTrend-cycle – right

20182011 2012 2013 2014 2015 2016 2017

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

2015

= 1

00

Energy

2011 20182012 2013 2014 2015 2016 2017

of 2018, which is an improvement in the balance of HRK 1.3bn from 2017 under the same methodology. This balance does not include paid shipyard guarantees, s which will be included in the general governement expenditures in accordance with the ESA 2010 methodology and worsen the budget balance.

At the end of November 2018, the consolidated general gov-ernment debt stood at HRK 279.8bn, a decrease of HRK 3.5bn from the end of 2017, deriving partly from the appreciation of the exchange rate of the kuna against the euro in the observed period. Favourable fiscal developments, coupled with a growth in the gross domestic product led at the end of November to a

fall in the public debt to GDP ratio to 73.3%, from 77.5% at the end of 2017 (Figure 63).

In early February the government issued the second tranche of bonds on the domestic market nominally worth HRK 5.0bn and maturing in 2029 and an issue of bonds nominally worth EUR 0.5bn and maturing in 2022. A T-bill issue worth nominal-ly EUR 1.5bn maturing on 7 February was partly refinanced by the funds raised through the mentioned bond issues and partly by a new euro T-bill issue worth EUR 1,048bn at 0% interest rate.


%

40

140

–9

–6

–3

0

3

6

60

80

100

120

Figure 5 Total volume of construction works


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

2015

= 1

00

2011 20182012 2013 2014 2015 2016 2017

–12

12 %

–8

–4

0

4

8

40

160

60

80

100

120

140

Figure 6 Buildings and civil engineering works


2015

= 1

00

Buildings (trend-cycle)Civil engineering works (trend-cycle)

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

2011 2012 2013 2014 20182015 2016 2017

%

84

88

92

96

100

104

108

116

112

–4

–3

–2

–1

0

1

2

4

3

Figure 7 Real retail trade turnover


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

2015

= 1

00

2011 2012 2013 2014 20182015 2016 2017

80

90

100

110

120

130

Figure 8 Business confidence indicatorsstandardised and seasonally adjusted values

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

20192012 2018201720152013 2014 2016

60

120

–30

–20

–10

0

20

10

75

90

105

Figure 9 EU confidence indicesseasonally adjusted series

Note: Data are up to January 2019.Source: Eurostat.

Industrial confidence indexConsumer confidence indexEconomic Sentiment Index (ESI) – right

long

-run

ave

rage

= 1

00

in %

, bal

ance

of r

espo

nses

20192012 2013 20182014 2015 2016 2017

–15

–10

–5

0

5

10

15

20

25

Note: Data for the fourth quarter of 2018 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. energy (quarterly rate of change) – right

Total exports (trend-cycle)Exports excl. energy (trend-cycle)

1.3

1.2

0.5

0.6

0.7

0.8

0.9

1.0

1.1

2011 2012 20152013 2014 20182016 2017


–8

20

16

12

–4

0

4

8

Note: Data for the fourth quarter of 2018 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. energy (quarterly rate of change) – right

Total imports (trend-cycle)Imports excl. energy (trend-cycle)

2011 2012 2013 2014 2015 2018201720160.8

1.0

1.2

1.4

1.6

1.8

2.2

2.0

–30

–20

–10

0

10

20

40

30

Notes: Imports of capital equipment (SITC divisions 71 – 77). Data for the fourth quarter of 2018 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) – right

Imports of road vehicles (trend-cycle)Imports of capital equipment (trend-cycle)

0.00

0.06

0.12

0.18

0.24

0.30

0.42

0.36

2011 2012 20152013 2014 20182016 2017

Figure 13 Trade in goods balance

Notes: Series are shown as three-member moving averages of monthly data. Data are up to November 2018.Source: CBS.

billi

on E

UR

Energy sources Capital goods ShipsRoad vehicles Other

TotalRaw materials excl. food and energyFood

–1.0

–0.8

–0.6

–0.4

–0.2

0.0

0.2

2011 2012 2013 2014 2015 20182016 2017

Note: Data for the first quarter of 2019 refer to January.Source: CPII 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

201920182012 201720162013 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

1.2

0.8

1,300

1,570

1,330

1,360

1,390

1,420

1,450

1,480

1,510

1,540

6

10

12

14

16

18

20

22%

8

201920182012 2013 2014 2015 20172016

Registered unemployment rate Adjusted unemployment rateILO unemployment rate

Figure 15 Unemployment ratesseasonally adjusted data

Notes: 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 CPII). Data for the first quarter of 2019 refer to January.Sources: CBS and CNB calculations (seasonally adjusted by the CNB).

–2

–1

0

1

2

3

4%

201920182012 2013 2014 2015 20172016

Industry (B, C, D, E) Public sector (O, P, Q)

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

Notes: 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 first quarter of 2019 refer to January.Sources: CBS and CNB calculations (seasonally adjusted by the CNB).

Nominal gross wagePrivate sector


%

–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

2018 20192012 201720142013 2015 2016

Figure 18 Year-on-year inflation rate and contributions ofcomponents to consumer price inflation

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

perc

enta

ge p

oint

s

Energy Unprocessed food Processed foodNon-food industrial goods without energy ServicesCore inflation (%)a Consumer price index (%)

2017 201920182015 2016–2.0

–1.5

–1.0

–0.5

0.0

0.5

1.0

1.5

3.0

2.5

2.0

20

70

80

90

100

110

120

130

60

50

40

30

150

250

350

450

550

650

750

850

Figure 19 Crude oil prices (Brent)

Sources: Bloomberg and CNB calculations.

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

USD/

barr

el

HRK/

barr

el

2018 20192012 201720142013 2015 2016

80

90

100

110

120

130

140

150

160

170

Figure 20 HWWI index (excl. energy)

Sources: HWWI and CNB calculations.

2015

= 1

00

HWWI index (USD) HWWI index (HRK)

2018 20192012 201720142013 2015 2016

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 USD/HRK – right CHF/HRK – right

4.5

5.0

5.5

6.0

6.5

7.0

8.0

7.5

201720142012 20192013 2015 2016 2018

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

Year-on-year rates

Month-on-month rates

12/2018 1/2019 1/2018 1/2019

Consumer price index and its components

Total index 0.8 0.2 –0.2 –0.9

Energy 0.9 –0.4 0.4 –0.8

Unprocessed food –0.6 –3.5 1.2 –1.8

Processed food 1.9 1.5 1.6 1.2

Non-food industrial goods without energy

0.1 –0.3 –3.2 –3.6

Services 1.1 1.2 0.0 0.1

Other price indicators

Core inflation 1.0 0.6 –0.7 –1.1

Index of industrial producer prices on the domestic market

0.5 0.5 0.1 0.1

Brent crude oil price (USD) –12.1 –14.1 7.4 5.0

HWWI index (excl. energy, USD) –5.9 –8.5 4.6 1.7

Note: Processed food includes alcoholic beverages and tobacco.Sources: CBS, Bloomberg and HWWI.


140

90

100

110

120

130

150

160

Figure 22 Nominal and real effective exchange ratesof the kuna

Notes: The real effective exchange rate of the kuna deflated by producer prices includes the Croatian index of industrial producer prices on the total market. 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)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2017

2014

2013

2015

2016

2001

2019

2018

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

2012 201720142013 2015 2016 20192018

%

–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.

basi

s po

ints

ECB benchmark rate EONIA 6M EURIBOREMBI spreads for European emerging market countries – right

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

20192012 2013 2014 2015 20172016 2018

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

20192012 2013 2014 20172015 2016 2018

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.

20192012 2013 2014 2015 2016 2017 2018

%

0

1

2

3

4

5

6

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

Source: CNB.

2018 20192012 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

2018 20192012 2013 2014 20172015 2016

%

0

2

4

6

8

10

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 clause

546/547-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

2018 20192012 2013 2014 20172015 2016

0

2

4

6

8

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

2012 2013 2014 2015 2019201820172016

%

0

4

6

8

10

2

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 2019201820172016

%

Figure 32 Interest rates on original new housing loans to households

Source: CNB.

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

3.0

3.5

4.0

4.5

5.0

5.5

2015 2019201820172016

%

5

6

7

8

9

10

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

Notes: 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.

2015 2019201820172016


%

0

1

2

3

4

5

Figure 34 Interest rates on household time deposits

Source: CNB.

Short-term household time deposits in kunaLong-term household time deposits in kuna

Short-term household time deposits in f/cLong-term household time deposits in f/c

Total household time deposits

2012 2013 2014 2015 2018 201920172016

%

0

2

4

6

8

2012 2013 2014 2015 201920182017

Figure 35 Interest rates on corporate time deposits

Source: CNB.

Short-term corporate time deposits in kunaLong-term corporate time deposits in kuna

Short-term corporate time deposits in f/cLong-term corporate time deposits in f/c

Total corporate time deposits

2016

%

0

2

4

6

8

10

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

2012 2013 2014 2015 2019201820172016

%

2

4

6

8

10

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

2012 2013 2014 2015 2019201820172016

–20

–10

0

10

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

201920182012 201720152013 2014 2016

–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

201920182012 201720152013 2014 2016


2

3

1

–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 placementsYear-on-year rate of change (balance-based) – right

Source: CNB.

201920182012 201720152013 2014 2016

–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.


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

201920182012 201720152013 2014 2016

%

–10

10

–5

0

5

Figure 42 Placements to households

billi

on H

RK

Source: CNB.


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

201920182012 201720152013 2014 2016–1.2

–0.6

0.0

0.6

1.2

–15

–10

–5

0

5

10

15

20

25

30%

Figure 43 Annual rate of change in household placementstransaction-based

Source: CNB.

2012 20192018201720152013 2014 2016

Kuna household placement F/c household placementsTotal household placements

–10

–5

0

5

10

15%

Figure 44 Annual rate of change in corporate placements transaction-based

Source: CNB.

2012 20192018201720152013 2014 2016

Kuna corporate placement F/c corporate placementsTotal corporate placements

0

50

100

150

200

250

300

350

Figure 45 Structure of credit institution placements

Source: CNB.

billi

on H

RK

Placements to other sectors Placements to the central governmentPlacements to households Placements to corporates

2012 2013 2014 2015 2017 20182016


%

30

40

50

60

70

100

80

90

0

10

20

30

40

50

–20

–10

Figure 46 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)

201920182012 201720152013 2014 2016

20

25

30

35

40

55

50

45

%

Figure 47 Share of kuna placements in total sector placements

Source: CNB.

201920182012 201720152013 2014 2016

Placements to non-financial corporations Placements to householdsPlacements to other sectors (incl. the government sector)

%

40

50

60

70

80

90

130

120

110

100

–10

–5

0

5

10

15

20

30

25

Figure 48 Money (M1)

Source: CNB.

billi

on H

RK

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

201920182012 201720152013 2014 2016

%

–4

0

4

8

12

16

200

230

260

290

320

350

Source: CNB.

Figure 49 Total liquid assets (M4)

billi

on H

RK

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

M4 (balance)

201920182012 20172013 2014 2015 2016

0

360

40

80

120

160

200

240

280

320

Figure 50 Structure of M4 monetary aggregate

Source: CNB.

billi

on H

RK

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

2012 2013 2014 2015 2017 20182016

%

25

31

34

37

28

–15

0

15

30

45

Figure 51 Kuna savings and time deposits

Source: CNB.

billi

on H

RK

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

201920182012 201720152013 2014 2016


%

–4

0

4

8

12

16

130

140

150

160

170

180

Source: CNB.

Figure 52 Foreign currency depositsbi

llion

HRK

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

Foreign currency deposits (balance)

201920182012 2017201620152013 2014

%

15

20

25

30

35

45

40

Figure 53 Share of kuna sources

Source: CNB.

Share of kuna sources in total sources of other monetary financial institutionsShare of kuna sources in total sources of other monetary financial institutions (excl. demand deposits)

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

%

0

35

30

5

10

15

20

25

Figure 54 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

0.0

3.0

2019201820172015201420132012 2016

0.5

1.0

1.5

2.0

2.5

–3

–2

–1

0

1

2

Figure 55 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

Notes: Positive values indicate net purchases and negative values indicate net sales. Legal persons include the government. Data for the first quarter of 2019 refer to January and February. Source: CNB.

2012 20192018201720152013 2014 2016

9

10

11

13

18

20

19

17

16

12

14

15

Figure 56 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

2012 2013 20192018201720152014 2016

Table 2 Balance of paymentspreliminary data, in million EUR

2017 Q3/2018a

Indices

2017/ 2016

Q3/2018a/ 2017

Current account 1,983.6 1,652.2 164.4 83.3

Capital account 296.4 509.4 44.4 171.9

Financial account (excl. reserves)

–756.4 505.7 –46.6 –66.9

International reserves 2,593.1 1,636.3 – 63.1

Net errors and omissions

–443.2 –19.6 86.1 4.4

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


–4

–3

–2

–1

0

1

2

3

4

5

6

–3

–2

–1

0

1

2

3

4

5

6

7

Figure 57 Current and capital account flows

a Sum of the last four quarters.Note: One-off effects include conversion of CHF-linked loans in 2015 and bank provisions for loans to the Agrokor Group in 2017.Source: CNB.

billi

on E

UR

as %

of G

DP

Secondary income ServicesPrimary incomeGoods

2011 2012 2017201620152013 2014

Current and capital accounta – rightCurrent and capital account excl. one-off effectsa – right

Capital transactions Current and capital account

–10

–8

–6

–4

–2

0

4

8

6

2

–5

–4

–3

–2

–1

0

1

2

4

3

Figure 58 Financial account flows by type of investment

a Sum of the last four quarters.Note: A positive value indicates net outflow of equity abroad (including on the basis of the growth in international reserves). Source: CNB.

billi

on E

UR

as %

of G

DP

Change in gross international reservesOther investmentPortfolio investmentDirect investment

Total net flowsa – right

2011 2012 20182017201620152013 2014

Financial derivatives

–3

–2

–1

0

1

2

5

4

3

–9

–6

–3

0

3

6

9

12

Figure 59 Financial account flows by capital structure

a The change in gross international reserves is reported net of foreign liabilities of the CNB. b Sum of the last four quarters.Notes: A positive value indicates net outflow of equity abroad. Net flows represent the difference between the change in assets and the change in liabilities.Source: CNB.

billi

on E

UR

as %

of G

DP

2011 2012 20182017201620152013 2014

Change in international reservesa

Debt liabilities, net excl. reserves Financial derivativesEquity liabilities, net

Total net capital flows excl. reservesa,b – rightTotal net capital flowsb – rightTotal net capital flows excl. reservesa

–2

0

1

2

3

–1

–5

–4

–3

Figure 60 Net external debt transactions

billi

on E

UR

General government Croatian National Bank Other MFIsOther sectors Direct investment Total

Notes: Transactions refer to the change in debt excl. cross-currency changes and other adjustments. Net external debt is calculated as the gross external debt stock net of foreign debt claims.Source: CNB.

2011 2012 20182017201620152013 2014

–4

–3

–2

0

1

3

2

–1

Figure 61 Gross external debt transactions

Note: Transactions refer to the change in debt excl. cross-currency changes and other adjustments.Source: CNB.

billi

on E

UR

General government Croatian National Bank Other MFIsOther sectors Direct investment Total

201820162011 2012 20152013 2014 2017

0

10

20

30

40

50

Figure 62 Gross external debtend of period

Note: Data are up to end-December 2018.Source: CNB.

billi

on E

UR

General government Croatian National Bank Other MFIsOther sectors Direct investment

2011 2012 2013 2014 2015 2017 20182016


0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

2011 2012 2013 2014 2016 2015 2017

as %

of G

DP

shar

e in

gen

eral

gov

ernm

ent d

ebt,

in %

External general government debtDomestic general government debtGeneral government debt – rightSGP reference value (60%)

Figure 63 General government debt

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

11/2018

63.869.4

80.484.0 83.7

80.2 77.5 73.3

Table 3 Consolidated general government balanceESA 2010, in million HRK

Jan. – Sep. 2017 Jan. – Sep. 2018

Total revenue 123,357 131,145

Direct taxes 15,868 17,046

Indirect taxes 53,895 57,505

Social contributions 32,137 33,633

Other 21,457 22,961

Total expenditure 121,733 124,584

Social benefits 42,687 43,643

Subsidies 4,212 4,094

Interest 7,345 7,269

Compensation of employees 30,243 31,704

Intermediate consumption 21,667 22,606

Investment 7,236 6,210

Other 8,342 9,058

Net lending (+)/borrowing (–) 1,624 6,561

Sources: Eurostat and CBS.

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

Jan. – Oct. 2017 Jan. – Oct. 2018

1 Revenue 117,820 123,651

2 Disposal of non-financial assets 550 459

3 Expenditure 110,148 113,654

4 Acquisition of non-financial assets 2,515 2,943

5 Net borrowing (1 + 2 – 3 – 4) 5,707 7,513

Sources: MoF and CNB calculations.

Table 5 General government debtin million HRK

Jan. – Nov. 2017

Jan. – Nov. 2018

Change in total debt stock 11,350 –3,523

Change in domestic debt stock 5,917 4,433

– Securities other than shares, short-term 436 –904

– Securities other than shares, long-term 9,656 6,323

– Loans –4,094 –915

Change in external debt stock 5,433 –7,955

– Securities other than shares, short-term 121 –145

– Securities other than shares, long-term 5,096 –3,462

– Loans 215 –4,348

Memo item:

Change in total guarantees issued 466 –1,137

Source: CNB.


Abbreviations and symbols

Abbreviations

BIS – Bank for International Settlementsbn – billionb.p. – basis pointsBOP – balance of paymentsc.i.f. – cost, insurance and freightCBRD – Croatian Bank for Reconstruction and DevelopmentCBS – Croatian Bureau of Statistics CCI – consumer confidence indexCDCC – Central Depository and Clearing Company Inc.CDS – credit default swapCEE – Central and Eastern EuropeanCEFTA – Central European Free Trade AgreementCEI – consumer expectations indexCES – Croatian Employment ServiceCHIF – Croatian Health Insurance FundCLVPS – Croatian Large Value Payment SystemCM – Croatian MotorwaysCNB – Croatian National BankCPF – Croatian Privatisation FundCPI – consumer price indexCPII – Croatian Pension Insurance InstituteCR – Croatian RoadsCSI – consumer sentiment indexDAB – State Agency for Deposit Insurance and Bank Reso-

lutiondep. – depositDVP – delivery versus paymentEC – European CommissionECB – European Central BankEFTA – European Free Trade AssociationEMU – Economic and Monetary UnionESI – economic sentiment indexEU – European Unionexcl. – excludingf/c – foreign currency FDI – foreign direct investmentFed – Federal Reserve SystemFINA – Financial AgencyFISIM – financial intermediation services indirectly measuredf.o.b. – free on boardGDP – gross domestic productGVA – gross value addedHANFA – Croatian Financial Services Supervisory AgencyHICP – harmonised index of consumer pricesILO – International Labour OrganizationIMF – International Monetary Fundincl. – includingIPO – initial public offeringm – millionMIGs – main industrial groupingsMM – monthly maturityMoF – Ministry of FinanceNCA – National Classification of ActivitiesNCB – national central bankNCS – National Clearing System

n.e.c. – not elsewhere classifiedOECD – Organisation for Economic Co-Operation and

Development OG – Official GazetteR – Republico/w – of whichPPI – producer price indexRTGS – Real-Time Gross SettlementQ – quarterlyRR – reserve requirementSDR – special drawing rightsSITC – Standard International Trade ClassificationSGP – Stability and Growth PactVAT – value added taxWTO – World Trade OrganizationZMM – Zagreb Money MarketZSE – Zagreb Stock Exchange

Three-letter currency codes

ATS – Austrian schillingCHF – Swiss franc CNY – Yuan RenminbiDEM – German markEUR – euroFRF – French francGBP – pound sterlingHRK – Croatian kunaITL – Italian liraJPY – Japanese yenUSD – US dollar

Two-letter country codes

BG – BulgariaCZ – Czech R.EE – EstoniaHR – CroatiaHU – HungaryLV – LatviaLT – LithuaniaPL – PolandRO – RomaniaSK – Slovak R.SI – Slovenia

Symbols

– – no entry.... – data not available0 – value is less than 0.5 of the unit of measure being

used∅ – averagea, b, c,... – indicates a note beneath the table and figure* – corrected data( ) – incomplete or insufficiently verified data

Documents

Information on economic trends (March 2019)