Information on economic trends - May 2020
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Information on
economic trends
May 2020CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 3
Summary
Available monthly indicators show that real activity fell in the first quarter 2020 from the previous quarter and
decelerated on an annual basis. Such projections are to a large extent based on data for March that reflect the first
negative economic consequences arising from the novel coronavirus. Due to the economic lockdown and the high
degree of uncertainty surrounding the future epidemiological situation, business and consumer confidence indices
fell sharply in April. The annual consumer price inflation rate dropped from 1.5% February to 0.6% in March, primarily
under the influence of refined petroleum product prices. Depreciation pressures on the kuna to euro exchange rate,
which arose in early March, ended in mid-April and the exchange rate started to appreciate slightly. The liquidity
of the domestic financial system, supported by the CNB’s expansionary monetary policy, remained high, enabling
continued favourable conditions for the financing of domestic sectors. Monetary institutions’ net claims on the
central government increased sharply in March, primarily due to the CNB’s purchases of government securities
in the secondary market. March also saw bank placements to other domestic sectors growing at an accelerated
rate due to the faster growth of placements to non-financial corporations, while the annual growth of household
placements decelerated slightly. The increased demand for foreign currency liquidity resulted in the strong growth
of foreign currency deposits of domestic sectors. According to the fiscal report for April, the central government
budget showed a surplus of 0.4% of GDP in 2019, which is an increase of 0.2 percentage points from 2018.
The GDP nowcasting model points to a fall in real economic ac- 2020 from an average of 6.9% in the previous two months, and is
tivity in the first quarter of 2020 from the end of the previous year expected to exceed 9% in April (Figure 15). The growth of wages
and a slowdown in its annual growth (Figure 1). It should be men- accelerated in the first quarter of 2020 from the last quarter of 2019
tioned that the assessment of economic developments in the first and it was broad-based (Figure 16.).1
quarter reflects adverse developments in March due to the conse- Consumer prices grew by 0.2% in March from the previous
quences of the novel coronavirus pandemic and measures to contain month (Table 1), primarily due to a seasonal increase in the prices
it. Industrial production fell 2.8% in March from February and 0.9% of clothing and footwear and to a lesser extent due to the growth of
in the first quarter from the previous quarter’s average. Production fruit and meat prices. The consumer price increase in March was
decreased on a monthly basis in all main industrial groupings except considerably moderated by a decline in refined petroleum prod-
in energy, while only energy and durable consumer goods recorded uct prices resulting from a sharp fall in global crude oil prices. The
a quarterly decrease (Figures 3 and 4). Real retail trade turnover de- Brent crude oil price was USD 21 per barrel in late March, as against
creased as much as 11.7% in March from the previous month and USD 50 in late February.2 The fall in crude oil prices, which had an
0.6% on a quarterly basis. This decrease could have been even larger annual rate of change of –50% in March, was due to a decrease in
if it had not been for favourable developments in January and Febru- demand caused by the global economic outlook worsening amid the
ary (Figure 7). Construction activity accelerated sharply in January pandemic and the failure of OPEC, Russia and other crude oil ex-
and February this year from the end of the previous year, with the porting countries to reach an agreement on the reduction of crude oil
volume of construction works up at a quarterly rate of 5.6% (Figures output. The annual consumer price inflation rate decelerated from
5 and 6). 1.5% in February to 0.6% in March (Figure 18), mainly on account
The results of the Consumer Confidence Survey for April 2020 of refined petroleum product prices (–0.8 percentage points). The
show a sharp deterioration in consumer expectations. The consumer annual rate of core inflation decelerated by 0.2 percentage points,
confidence index stopped growing in March in response to the pan- from 1.5% in February to 1.3% in March, primarily due to a de-
demic and in April, when economic activity came to a near stand- crease in the annual rate of change in the prices of footwear, milk,
still, the deterioration in expectations was the sharpest since the air transport and health insurance. In contrast, the annual rate of do-
start of the Survey. Expectations worsened in all components of the mestic non-energy producer prices accelerated from 0.3% in Febru-
index, with the highest decline recorded in expectations about the ary to 0.5% in March, with food product prices rising the most.
general economic situation in Croatia and the financial situation of Having decreased in the last quarter of 2019, foreign trade in
households in twelve months from now. The Business Confidence goods picked up pace at the beginning of 2020. This was especially
Survey shows that business confidence declined sharply in April in evident in goods exports, which increased by 5.5% in January from
all activities, most of all in services and trade (Figure 8). the previous quarter’s average (Figure 10). Exports excluding ener-
Labour market developments also deteriorated considerably in gy grew by 4.8%, driven primarily by exports of other transport ve-
March and April 2020 as a result of pandemic containment meas- hicles (mainly ships), capital goods (electrical machinery, apparatus
ures. Having increased in January and February, the number of em- and appliances) and food products. Total goods imports increased
ployed persons dropped in March, with the result that the employ- by 2.6% in January from their average value in the last quarter of
ment growth trend stopped. Employment decreased at an even faster 2019, while imports excluding energy went up 2.2% (Figure 11).
rate in April, with the highest decrease recorded in accommodation The growth of the narrow aggregate was mostly driven by medical
and food service activities, which had been the hardest hit by restric- and pharmaceutical products, road vehicles (Figure 12), textiles and
tions (Figure 14). Due to the strong inflow of new unemployment food products. The first available figures for February show that both
entries into the CES register, unemployment increased in March goods exports and imports grew even more in the first two months
2020 despite continued clearings from the register. According to of 2020 than in the previous quarter, 8.8% and 6.2% respectively.
the latest available data (as at 30 April), the increase continued at Depreciation pressures on the exchange rate of the kuna ver-
an accelerated pace in April. The unemployment increase boosted sus the euro, begun in early March, continued into the first half of
the registered unemployment rate, which went up to 7.7% in March April. The CNB sold to banks smaller amounts of foreign exchange
1 On 20 April 2020, the CBS released data on wages paid in March for February 2020 according to the full-time equivalent principle and, for analytical purposes,
data on wages for 2019 reported according to a changed methodology.
2 Although they rose to USD 30 at the beginning of April, crude oil prices fell again afterwards, standing at USD 23 at the end of the month.4 CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020
(EUR 50.0m in total) outside auctions on three occasions in April, in March 2020, while net foreign assets (NFA) decreased, with the
responding to major individual foreign exchange purchases in the result that total liquid assets (M4) went up by HRK 9.1bn (2.7%).
market, otherwise characterised by a very low turnover, which could The rise in NDA resulted from a sharp increase in monetary institu-
have increased demand and created depreciation expectations. The tions’ net claims on the central government, primarily generated by
exchange rate stabilised and started appreciating slightly in mid- the CNB’s purchase of HRK 4.5bn in government securities in the
April. The foreign exchange market was also pacified by the agree- secondary market and the growth of placements to other domestic
ment between the CNB and the ECB on establishing a precautionary sectors. The growth of M4 was also due to the already mentioned
currency swap line, allowing for the exchange of the kuna for the weakening of the kuna versus the euro in March. The changes in the
euro in the amount of EUR 2bn. The exchange rate stood at EUR/ NFA structure resulted from CNB foreign exchange interventions in
HRK 7.55 at the end of April, appreciating by 0.7% from EUR/HRK the market, which reduced the NFA of the central bank, while in-
7.61 at the end of March (Figure 21). Having strengthened slightly creasing the NFA of credit institutions. As regards M4 components,
in April, the nominal effective exchange rate of the kuna was 0.5% foreign currency deposits recorded the highest percentage monthly
lower at the end the month than at the end of March. The strength- growth (transaction-based) since 2007. The growth was due to an
ening of the kuna vis-à-vis the euro was offset by the weakening increase in demand for foreign currency liquidity, caused by the un-
of the kuna versus the US dollar and the yuan renminbi due to the certainty surrounding the economic consequences of the coronavirus
strengthening of these currencies against the euro in the global for- pandemic, and much of it was generated by outflows from UCITS
eign exchange market. funds. Currency outside credit institutions also increased in March,
Short-term interest rates on the European money market re- whereas kuna deposits decreased. The transaction-based annual
mained in negative territory in April, but exhibited varied trends. growth of M4 accelerated significantly to 7.6% (Figure 49), whereas
The overnight interest rate for the euro area banking market, EO- the annual growth of money (M1) decelerated to 17.2% (Figure 48).
NIA, edged down, standing at –0.45% at the end of the month. In Due to the growth of foreign currency deposits, quasi-money grew
contrast, with the pandemic-induced tightening of financial condi- at an annual rate of 1.7% (transaction-based), after having recorded
tions in the European interbank market, the six-month EURIBOR the negative rates of change for three successive years.
continued to rise and hit its four-year high of –0.17% at the end of Total placements of monetary institutions to domestic sectors
the month (Figure 24). After having widened in March, risk premi- (except central government) increased by HRK 2.9bn in March, with
ums for all European emerging market countries remained relatively their annual growth (transaction based) accelerating to 5.6% (Figure
stable in April (Figure 25). The risk premium for Croatia was at 79 40). Placements to non-financial corporations increased at an ac-
basis points at the end of April, close to its level at the end of March. celerated annual rate of 4.2% (Figure 41), partly due to the disap-
However, the EMBI for Croatia continued to increase in April, pearance of the remaining negative effect caused by the activation of
which is an indication of the growth of foreign borrowing costs (Fig- government guarantees to shipyards. In contrast, the annual growth
ure 29). of household placements slowed down to 6.1% (Figure 42), predom-
Supported by the CNB’s expansionary monetary policy, the li- inantly due to a slowdown in the annual growth of general purpose
quidity of the domestic financial system remained high. The aver- cash loans (9.1%), while the growth of housing loans slowed down
age daily excess kuna liquidity was as high as HRK 32.8bn in April, only slightly, to 6.6%. As regards the currency structure, the weak-
thanks among other things to regular weekly operations. The domes- ening of the kuna in March slightly reduced the share of kuna place-
tic interbank market, after having had no turnover for ten months, ments in total household placements (Figure 47) for the first time
recorded a turnover in overnight interbank loans at an average in- since the beginning of 2015. The annual growth of the nominal stock
terest rate of 0.1% (Figure 27). The remaining overnight interbank of placements (5.0%) in March continued to be smaller than transac-
market segments had lower trading volumes in April than in March, tion based growth, mainly due to the sale of non-performing corpo-
while the implied interest rate on interbank trading in foreign ex- rate placements.
change swaps and the interest rate on banks’ repo operations in- Gross international reserves decreased by EUR 0.5bn (3.2%) in
creased slightly. April also saw an auction of MoF T-bills, at which April, standing at EUR 16.0bn at the end of the month (Figure 56).
one-year kuna bills were auctioned at an interest rate of 0.06%, un- As in the previous month, the decrease resulted from the sales3 of
changed since October 2019 (Figure 28). At the end of April, the foreign exchange to banks aimed at preserving the stability of the
government also conducted an auction to refinance EUR 1.0bn in exchange rate of the kuna versus the euro. Gross international re-
matured treasury bills by a new issue of the same amount, with a serves dropped by EUR 2.6bn (13.9%) from the end of the previous
364-day maturity. The interest rate of 0.06% was 0.06 percentage year. Net international reserves decreased by EUR 0.6bn (4.0%) in
points higher than the rate on the issue of January 2019. April, amounting to EUR 15.2bn at the end of the month.
Bank interest rates on new corporate and household loans mostly The net external debt of domestic sectors rose by EUR 0.3bn
decreased or held steady in March (Figures 28, 29 and 30). Interest (Figure 60) in the first two months of 2020, primarily due to the
rates on original new kuna working capital loans fell considerably, deterioration in the net external positions of the government and
whereas interest rates on kuna investment loans indexed to foreign credit institutions and, to a considerably lesser extent, of the central
currency increased (Figure 31). Interest rates on original new hous- bank. These negative developments were mitigated by a noticeable
ing and consumer loans to households remained almost unchanged decrease in the net external debt of other domestic sectors. Gross
from February (Figures 32 and 33). Interest rates on household external debt reached EUR 42.0bn at the end of February (Figure
time deposits did not change significantly in March, while interest 62), which is an increase of EUR 1.1bn from the end of the previ-
rates on corporate time deposits decreased (Figures 34 and 35). The ous year.
spread between interest rates on total new loans and deposits nar- The Excessive Deficit Procedure report for April 2020 shows
rowed to 4.8 percentage points in March, while the spread between that the general government budget balance remained positive in
interest rates on the stocks of loans and deposits held steady at 4.2 2019 and was even slightly higher than in the previous year. The
percentage points (Figure 37). general government budget surplus stood at 0.4% of GDP, which is
Net domestic assets (NDA) of the monetary system grew strongly an increase of 0.2 percentage points from 2018. The increase was
3 The foreign exchange auction conducted on the last day of March (EUR 618.15m) had an effect on monetary aggregates in April because the settlement date
was 2 April 2020.CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 5
accounted for by the strong annual growth of 6.7% on the revenue absorption of EU funds, but these transactions, as a rule, have a neu-
side of the budget, driven by increases in all major revenue catego- tral impact on the general government budget balance. General gov-
ries. As a result, the total revenue to GDP ratio grew by 1 percentage ernment revenues from EU funds reached 1.5% GDP, which is an
point from the previous year, to 47.5% of GDP. The rise on the ex- increase of 0.6 percentage points from the previous year.
penditure side of the budget was only slightly lower (6.3%), reflect- As shown by monthly MoF data,4 the general government budget
ing the growth of all categories, except other current expenditures. deficit was about HRK 1.6bn higher than in the same period in the
The total expenditure to GDP ratio was also higher than in 2018, previous year due to a slightly higher increase in expenditures than
increasing by 0.8 percentage points to 47.1% of GDP. The growth of in revenues. Public debt stood at HRK 291.6bn in January 2020,
revenues and expenditures in 2019 was also related to the stronger down about HRK 1.4bn from December 2019.
Figure 1 Quarterly gross domestic product Figure 3 Industrial production
seasonally adjusted real values
8 116 % 9 112
%
2015 = 100
2015 = 100
6 112 6 108
4 108 3 104
2 104 0 100
0 100 –3 96
–2 96 –6 92
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Year-on-year rate of change of GDP
Level of GDP (seasonally adjusted values) – right Quarterly rate of change of seasonally adjusted index
Trend-cycle – right
Note: Data for the first quarter of 2020 are estimated with the use of the CNB’s
monthly indicator of real economic activity, on the basis of data published until 30
April 2020.
Sources: CBS data seasonally adjusted by the CNB and CNB calculations. Source: CBS data seasonally adjusted by the CNB.
Figure 2 GDP rate of change Figure 4 Industrial production by main industrial groupings
contributions by components seasonally adjusted indices
8 8 % 130
2015 = 100
percentage points
6 6
120
4 4
2 2 110
0 0
100
–2 –2
90
–4 –4
–6 –6 80
2012 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 2020
Imports of goods and services Gross fixed capital formation
Exports of goods and services Government consumption Intermediate goods Non-durable consumer goods Energy
Changes in inventories Household consumption Capital goods Durable consumer goods
Gross domestic product – right
Note: Quarterly data are calculated as the average of monthly data.
Source: CBS. Source: CBS data seasonally adjusted by the CNB.
4 Monthly data for central government, state government and social security sub-sectors that, pursuant to Council Directive 2011/85/EU, must be published be-
fore the end of the following calendar month. The published data refer to general government units according to the scope of the ESA 2010 statistical methodol-
ogy, except for data for local government, which are published on a quarterly basis.6 CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020
Figure 5 Total volume of construction works Figure 8 Consumer and business confidence indicators
standardised and seasonally adjusted values
% 8 140 130
2015 = 100
6 130 120
110
4 120
100
2 110
90
0 100
80
–2 90
70
–4 80 60
–6 70 50
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Construction business confidence indicator Industry business confidence indicator
Quarterly rate of change of seasonally adjusted index Retail trade business confidence indicator Long-run average = 100
Trend-cycle – right Services business confidence indicator CCI consumer confidence index
Note: Data for the first quarter of 2020 refer to January and February.
Source: CBS data seasonally adjusted by the CNB. Sources: Ipsos and CNB data seasonally adjusted by the CNB.
Figure 6 Buildings and civil engineering works Figure 9 EU confidence indices
seasonally adjusted series
160 12 % 20 120
in %, balance of responses
long-run average = 100
2015 = 100
140 8 10 108
120 4 0 96
100 0 –10 84
80 –4 –20 72
60 –8 –30 60
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Civil engineering works (trend-cycle)
Industrial confidence index
Buildings (trend-cycle)
Consumer confidence index
Buildings (quarterly rate of change) – right
Civil engineering works (quarterly rate of change) – right Economic Sentiment Index (ESI) – right
Source: CBS data seasonally adjusted by the CNB. Source: Eurostat.
Figure 7 Real retail trade turnover Figure 10 Goods exports (f.o.b.)
% 6 124 1.4 30
2015 = 100
billion EUR
in %, seasonally adjusted
1.3 25
5 120
1.2 20
4 116
1.1 15
3 112 1.0 10
2 108 0.9 5
0.8 0
1 104
0.7 –5
0 100 0.6 –10
–1 96 0.5 –15
0.4 –20
–2 92 2012 2013 2014 2015 2016 2017 2018 2019
2013 2014 2015 2016 2017 2018 2019 2020
Total exports (trend-cycle)
Exports excl. energy (trend-cycle)
Quarterly rate of change of seasonally adjusted index
Total exports (quarterly rate of change) – right
Trend-cycle – right
Exports excl. energy (quarterly rate of change) – right
Source: CBS data seasonally adjusted by the CNB. Source: CBS data seasonally adjusted by the CNB.CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 7
Figure 11 Goods imports (c.i.f.) Figure 14 Employment by NCA activities
seasonally adjusted data, contributions to the quarterly rate of
change
2.2 20 1.5 1,570
in thousand
percentage points
billion EUR
in %, seasonally adjusted
2.0 16 1.0 1,540
0.5 1,510
1.8 12
0.0 1,480
1.6 8
–0.5 1,450
1.4 4 –1.0 1,420
1.2 0 –1.5 1,390
–2.0 1,360
1.0 –4
–2.5 1,330
0.8 –8
2013 2014 2015 2016 2017 2018 2019 2020 –3.0 1,300
2012 2013 2014 2015 2016 2017 2018 2019 2020
Total imports (trend-cycle)
Imports excl. energy (trend-cycle) Public sector (O, P, Q) Other Industry (B, C, D, E)
Total imports (quarterly rate of change) – right Construction (F) Service activities (G, H, I)
Imports excl. energy (quarterly rate of change) – right IT sector and business activities (J, M, N) Employment – right
Note: Data for the second quarter of 2020 refer to April.
Source: CBS data seasonally adjusted by the CNB. Source: CPII data seasonally adjusted by the CNB.
Figure 12 Imports of capital equipment and road Figure 15 Unemployment rates
vehicles (c.i.f.) seasonally adjusted data
0.42 40 % 22
billion EUR
in %, seasonally adjusted
20
0.36 30
18
0.30 20
16
0.24 10 14
12
0.18 0
10
0.12 –10
8
0.06 –20 6
2012 2013 2014 2015 2016 2017 2018 2019 2020
0.00 –30
2013 2014 2015 2016 2017 2018 2019 2020 Registered unemployment rate Adjusted unemployment rate
ILO unemployment rate
Imports of road vehicles (trend-cycle)
Imports of capital equipment (trend-cycle) Note: Since January 2015, the calculation of the registered unemployed rate has used
Imports of road vehicles (quarterly rate of change) – right the data on employed persons from the JOPPD form. Data on the number of
Imports of capital equipment (quarterly rate of change) – right employed persons have been revised backwards for the period from January 2016 to
July 2019. The adjusted unemployment rate is the CNB estimate and is calculated as
Note: Imports of capital equipment (SITC divisions 71 – 77). Data for the first quarter the share of the number of registered unemployed persons in the working age
of 2020 refer to January. population (unemployed persons and persons insured with the CPII).
Source: CBS data seasonally adjusted by the CNB. Sources: CBS and CNB calculations (seasonally adjusted by the CNB).
Figure 13 Trade in goods balance Figure 16 Average nominal gross and net wage
seasonally adjusted data, quarterly rate of change
0.2 % 4 8000
HRK
billion EUR
3 7000
0.0
2 6000
–0.2
1 5000
–0.4 0 4000
–1 3000
–0.6
–2 2000
–0.8 2013 2014 2015 2016 2017 2018 2019 2020
Industry (B, C, D, E) Public sector (O, P, Q) Private sector
–1.0 Nominal gross wage Nominal net wage increased by compensation – right
Nominal net wage – right
–1.2
2013 2014 2015 2016 2017 2018 2019 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 on average
Energy sources Capital goods Ships wages paid in February 2020 were reported in full-time equivalent, in contrast with
Road vehicles Food Other the previous periods, when average wages were calculated by dividing total
Raw materials excl. food and energy Total disbursements by the number of employees who received these disbursements,
excluding all those who worked fewer than 80 hours per month. Data on wages in
Note: Series are shown as three-member moving averages of monthly data. Data are 2019 reported in full-time equivalent were released for analytical purposes. Data on
up to January 2020. disbursements paid before 2016 are CNB estimates.
Source: CBS. Sources: CBS and CNB calculations (seasonally adjusted by the CNB).8 CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020
Table 1 Price indicators
year-on-year and month-on-month rates of change
Figure 19 Crude oil prices (Brent)
Year-on-year Month-on-
rates month rates
2/20 3/20 3/19 3/20
130 850
USD/barrel
HRK/barrel
Consumer price index and its components 120
750
Total index 1.5 0.6 1.0 0.2 110
Energy 0.9 –3.8 1.5 –3.2 100 650
Unprocessed food 4.1 5.6 –0.6 0.8 90
80 550
Processed food 2.0 1.7 0.4 0.1
70 450
Non-food industrial goods without 60
0.2 –0.1 3.0 2.8 350
energy 50
Services 1.9 1.6 0.1 –0.1 40
250
Other price indicators 30
Core inflation 1.5 1.3 1.2 1.0 20 150
2012 2013 2014 2015 2016 2017 2018 2019
Index of industrial producer prices on
1.3 –1.2 0.6 –1.9
the domestic market
Brent crude oil price (USD) –14.2 –50.3 3.6 –40.0 Brent (USD/barrel) Brent (HRK/barrel) – right
HWWI index (excl. energy, USD) –3.8 –4.5 –1.2 –2.0
Note: Processed food includes alcoholic beverages and tobacco.
Sources: CBS, Bloomberg and HWWI. Sources: Bloomberg and CNB calculations.
Figure 17 Consumer price index and core inflation Figure 20 HWWI index (excl. energy)
annualised month-on-month rate of changea
% 8 170
2015 = 100
160
150
4
140
130
0
120
110
–4 100
90
–8 80
2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019
Consumer price index Core inflation HWWI index (USD) HWWI index (HRK)
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. Sources: HWWI and CNB calculations.
Figure 18 Year-on-year inflation rate and contributions of Figure 21 Daily nominal exchange rate – HRK vs. EUR, USD
components to consumer price inflation and CHF
CNB midpoint exchange rate
3 9.5 8.0
percentage points
9.0 7.5
2
8.5 7.0
1 8.0 6.5
7.5 6.0
0
7.0 5.5
–1
6.5 5.0
–2 6.0 4.5
2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 2020
Energy Unprocessed food Processed food
Non-food industrial goods without energy Services EUR/HRK USD/HRK – right CHF/HRK – right
Core inflation (%)a Consumer price index (%)
a
Core inflation does not include agricultural product prices, energy prices and
administered prices.
Sources: CBS and CNB calculations. Source: CNB.CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 9
Figure 22 Nominal and real effective exchange rates Figure 25 CDS spreads for 5-year government bonds of
of the kuna selected countries
170 450
index, 2010 = 100
basis points
160 400
150
350
140
130 300
120 250
110 200
100
150
90
2014
2015
2016
2017
2018
2019
2020
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
100
50
Nominal Real (PPI)
Real (ULC total economy) Real (CPI) 0
2013 2014 2015 2016 2017 2018 2019 2020
Real (ULC manufacturing)
Bulgaria Czech R. Croatia Hungary
Note: The real effective exchange rate of the kuna deflated by producer prices
Poland Romania Slovenia Slovak R.
includes the Croatian index of industrial producer prices on the total market. The unit
Germany Italy
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 Note: Credit default swaps (CDS) spread is an annual premium that a CDS buyer pays
quarterly values. A fall in the index indicates an effective appreciation of the kuna. for protection against credit risk associated with an issuer of an instrument.
Source: CNB. Source: S&P Capital IQ.
Figure 23 Contributionsa of individual currencies to the Figure 26 CDS spreads for selected parent banks of
monthly rate of change of the average index of the nominal domestic banks
effective kuna exchange rate (INEER)
1.5 500
basis points
percentage points
1.0
400
0.5
0.0 300
–0.5
200
–1.0
100
–1.5
–2.0 0
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Unicredit S.p.A. Société Générale
EUR USD CHF Other currencies INEER (%) Erste Group Bank AG Raiffeisen Bank International AG
Intesa Sanpaolo S.p.A.
a
Negative values indicate contributions to the appreciation of the INEER.
Source: CNB. Source: S&P Capital IQ.
Figure 24 Interest rates on the euro and the average yield Figure 27 Overnight interest rates and turnovers
spread on bonds of European emerging market countries
1.5 300 % 0.4 80
promet u mlrd. HRK
%
basis points
0.3
1.0 200
0.2 60
0.5 100 0.1
0.0 40
0.0 0
–0.1
–0.2 20
–0.5 –100
–0.3
–1.0 –200 –0.4 0
2013 2014 2015 2016 2017 2018 2019 2020 2019 2020
Bank repo operations – right Interbank trading – right
ECB benchmark rate EONIA 6M EURIBOR Bank deposit trading – right
EMBI spreads for European emerging market countries – right Interest rate on interbank demand deposit trading
Interbank interest rate Bank fx swap trading – right
Interest rate on bank repo operations
Note: EMBI, or the Emerging Market Bond Index, shows the spread between yields Implied interest rate on interbank fx swap trading
on government securities of emerging market economies, Croatia included, and
risk-free securities issued by developed countries.
Sources: ECB, Bloomberg and J.P. Morgan. Source: CNB.10 CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020
Figure 28 Short-term financing costs in kuna without a Figure 31 Interest rates on original new loans to non-
currency clause financial corporations
% 12 % 10
10 8
8
6
6
4
4
2
2
0
0 2015 2016 2017 2018 2019
2013 2014 2015 2016 2017 2018 2019 2020
Working capital loans in kuna
364-day T-bills (HRK) Working capital loans in kuna indexed to f/c
Short-term kuna corporate loans without a currency clause Investment loans in kuna indexed to f/c
Short-term kuna household loans without a currency clause Revolving loans, overdrafts and credit card credit in kuna
Sources: MoF and CNB. Source: CNB.
Figure 29 Long-term financing costs in kuna with a currency Figure 32 Interest rates on original new housing loans to
clause and in foreign currency households
% 10 % 5.5
8 5.0
6
4.5
4
4.0
2
3.5
0
2013 2014 2015 2016 2017 2018 2019 2020 3.0
Long-term corporate loans with a currency clause
Long-term housing loans to households with a currency clause 2.5
Yield on generic 10-year German bond + EMBI Croatia 2015 2016 2017 2018 2019 2020
Long-term household loans with a currency clause, excl. housing loans
546/547-day T-bills (EUR, indexed to f/c) 455-day T-bills (EUR, indexed to f/c) Housing loans in kuna Housing loans in f/c
Total housing loans
Note: EMBI, or the Emerging Market Bond Index, issued by developed countries,
shows the spread between yields on government securities of emerging market
economies, Croatia included, and risk-free securities of developed countries.
Sources: MoF, Bloomberg and CNB. Source: CNB.
Figure 30 Bank interest rates on loans to non-financial Figure 33 Interest rates on original new consumer and other
corporations by volume loans to households
8 10
NIR on new loans, in %
%
7
9
6
8
5
4 7
3 6
2
5
1
4
0 2015 2016 2017 2018 2019 2020
2013 2014 2015 2016 2017 2018 2019 2020
Consumer loans in kuna Consumer loans in f/c
Interest rate spread between loans up to HRK 7.5m and loans over HRK 7.5m Total consumer loans Other loans
Loans up to HRK 7.5m Loans over HRK 7.5m
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. Source: CNB.CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 11
Figure 34 Interest rates on household time deposits Figure 37 Spread between interest rates on loans (excl.
revolving loans) and interest rates on deposits
% 5 % 9
8
4
7
3 6
5
2
4
1 3
2
0 2013 2014 2015 2016 2017 2018 2019 2020
2013 2014 2015 2016 2017 2018 2019 2020
Kuna loans without a currency clause – kuna deposits without a currency clause
Short-term household time deposits in kuna Short-term household time deposits in f/c Kuna loans with a currency clause – deposits in f/c
Long-term household time deposits in kuna Long-term household time deposits in f/c Total – new Total – balances
Total household time deposits
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. Source: CNB.
Figure 35 Interest rates on corporate time deposits Figure 38 Net foreign assets, net domestic assets and total
liquid assets (M4)
absolute change in the last 12 months
% 8 30
billion HRK
7
20
6
5 10
4
3 0
2
–10
1
0 –20
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Short-term corporate time deposits in kuna Short-term corporate time deposits in f/c
Long-term corporate time deposits in kuna Long-term corporate time deposits in f/c Net foreign assets Net domestic assets M4
Total corporate time deposits
Source: CNB. Source: CNB.
Figure 36 Average interest rates on loans (excl. revolving Figure 39 Net domestic assets, structure
loans) and deposits absolute change in the last 12 months
% 10 25
billion HRK
8 15
6 5
4 –5
2 –15
0 –25
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Loans – balances Loans – new
Net placements to the government Placements
Deposits – balances Deposits – newa
Other net assets Net domestic assets
a
For time deposits, interest rates on newly received deposits are weighted by their
balances.
Source: CNB. Source: CNB.12 CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020
Figure 40 Placements Figure 43 Annual rate of change in household placements
transaction-based
3 15 % % 30
billion HRK
25
2 10
20
15
1 5
10
0 0 5
0
–1 –5 –5
–10
–2 –10
2013 2014 2015 2016 2017 2018 2019 2020 –15
2013 2014 2015 2016 2017 2018 2019 2020
Transactions in total placements
Year-on-year rate of change (balance-based) – right Kuna household placement F/c household placements
Year-on-year rate of change (transaction-based) – right Total household placements
Source: CNB. Source: CNB.
Figure 41 Placements to corporates Figure 44 Annual rate of change in corporate placements
transaction-based
3 18 % % 15
billion HRK
2 12 10
1 6 5
0 0
0
–1 –6
–5
–2 –12
2013 2014 2015 2016 2017 2018 2019 2020 –10
2013 2014 2015 2016 2017 2018 2019 2020
Transactions in corporate placements
Year-on-year rate of change (balance-based) – right Kuna corporate placement F/c corporate placements
Year-on-year rate of change (transaction-based) – right Total corporate placements
Source: CNB. Source: CNB.
Figure 42 Placements to households Figure 45 Structure of monetary institution placements
1.6 10 % 350
billion HRK
billion HRK
300
0.8 5
250
200
0.0 0
150
100
–0.8 –5
50
–1.6 –10 0
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019
Transactions in household placements
Placements to other sectors Placements to the central government
Year-on-year rate of change (balance-based) – right
Placements to households Placements to corporates
Year-on-year rate of change (transaction-based) – right
Source: CNB. Source: CNB.CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 13
Figure 46 Placements of monetary financial institutions to Figure 49 Total liquid assets (M4)
the central government
100 50 % 350 16 %
billion HRK
billion HRK
90 40
320 12
80 30
290 8
70 20
60 10 260 4
50 0
230 0
40 –10
30 –20 200 –4
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
M4 (balance)
Placements to the central government (balance)
Year-on-year rate of change (balance-based) – right
Year-on-year rate of change – right
Year-on-year rate of change (transaction-based) – right
Source: CNB. Source: CNB.
Figure 47 Share of kuna placements in total sector Figure 50 Structure of M4 monetary aggregate
placements
% 60 360
billion HRK
55 320
280
50
240
45
200
40
160
35
120
30 80
25 40
20 0
2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019
Placements to non-financial corporations Placements to households M1 Kuna deposits Foreign currency deposits
Placements to other sectors (incl. the government sector) Bonds, money market instruments and MMFs shares/units
Source: CNB. Source: CNB.
Figure 48 Money (M1) Figure 51 Kuna savings and time deposits
150 45 % 37 45 %
billion HRK
billion HRK
140 40
130 35
120 30 34 30
110 25
100 20
31 15
90 15
80 10
70 5 28 0
60 0
50 –5
40 –10 25 –15
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
M1 (balance) Year-on-year rate of change (balance-based) – right Kuna deposits (balance)
Year-on-year rate of change (transaction-based) – right Year-on-year rate of change – right
Note: From March 2019, the growth rate (transaction-based) excludes the effect of
the reclassification of money market funds.
Source: CNB. Source: CNB.14 CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020
Figure 52 Foreign currency deposits Figure 55 Spot transactions in the foreign exchange market
(net turnover)
180 16 % 3
billion HRK
billion EUR
2
170 12
1
0
160 8
–1
150 4 –2
–3
140 0
–4
130 –4 –5
2013 2014 2015 2016 2017 2018 2019 2020
2013 2014 2015 2016 2017 2018 2019 2020
Bank transactions with legal persons Bank transactions with natural persons
Foreign currency deposits (balance) Bank transactions with foreign banks Bank transactions with the CNB
Year-on-year rate of change (balance-based) – right Total bank transactions CNB transactions with government and the EC
Year-on-year rate of change (transaction-based) – right
Note: Positive values indicate net purchases and negative values indicate net sales.
Legal persons include the government. Data for the second quarter of 2020 refer to
April.
Source: CNB. Source: CNB.
Figure 53 Share of kuna sources Figure 56 International reserves of the CNB
at current rate of exchange
% 50 23
billion EUR
45 21
40 19
35 17
30 15
25 13
20 11
15 9
2013 2014 2015 2016 2017 2018 2019 2020
2011
2012
2013
2014
2015
2016
2017
2018
2019
2010
2020
Share of kuna sources in total sources of other monetary financial institutions International reserves Net usable international reservesa
Share of kuna sources in total sources of other monetary financial institutions
(excl. demand deposits)
a
NUIR = international reserves – foreign liabilities – reserve requirements in f/c
– foreign currency government deposits.
Source: CNB. Source: CNB.
Figure 54 Bank liquidity and overnight interest rate on bank Table 2 Balance of payments
demand deposit trading preliminary data, in million EUR
Indices
% 1.6 40 2018 2019
billion HRK
2018/ 2019/
1.4 35 2017 2018
1.2 30 Current account 982.1 1,570.8 58.5 159.9
1.0 25
Capital account 729.8 1,117.1 135.7 153.1
0.8 20
0.6 15 Financial account
241.8 1,427.4 –114.5 590.2
(excl. reserves)
0.4 10
0.2 5 International reserves 1,545.0 989.6 59.6 64.1
0.0 0
2013 2014 2015 2016 2017 2018 2019 2020 Net errors and
75.0 –270.8 45.3 –361.2
Overnight interbank interest rate omissions
Liquidity surplus (incl. overnight deposits with the CNB) – right
Note: In line with the 6th edition of the Balance of Payments and International Investment
Note: Liquidity surplus is the difference between the balance in bank settlement Position Manual (BPM6).
accounts with the CNB and the amount that banks are required to hold in their Source: CNB.
accounts after the calculation of reserve requirements.The overnight interest rate until
the end of 2015 refers to the overnight interbank interest rate and as of the beginning
of 2016 to the overnight interest rate on bank demand deposit trading.
Source: CNB.CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 15
Figure 57 Current and capital account flows Figure 60 Net external debt transactions
8 8 3
as % of GDP
billion EUR
billion EUR
6 6 2
1
4 4
0
2 2
–1
0 0 –2
–2 –2 –3
–4 –4 –4
2012 2013 2014 2015 2016 2017 2018 2019
–5
Primary income Secondary income Services 2013 2014 2015 2016 2017 2018 2019 2020
Goods Capital transactions Current and capital account
Current and capital account – right
a General government Croatian National Bank Other MFIs
Current and capital account excl. one-off effectsa – right Other sectors Direct investment Total
a
Sum of the last four quarters. Note: Transactions refer to the change in debt excl. cross-currency changes and other
Note: One-off effects include conversion of CHF-linked loans in 2015 and bank adjustments. Net external debt is calculated as the gross external debt stock net of
provisions for loans to the Agrokor Group in 2017 and 2018. foreign debt claims. Data for the first quarter of 2020 refer to January and February.
Source: CNB. Source: CNB.
Figure 58 Financial account flows by type of investment Figure 61 Gross external debt transactions
5 10 3
as % of GDP
billion EUR
billion EUR
4 8
2
3 6
2 4 1
1 2 0
0 0
–1
–1 –2
–2 –4 –2
–3 –6
–3
–4 –8
2012 2013 20144 2015 2016 2017 2018 2019 –4
2013 2014 2015 2016 2017 2018 2019 2020
Direct investment Portfolio investment
Other investment Change in gross international reserves General government Croatian National Bank Other MFIs
Financial derivatives Total net flowsa – right Other sectors Direct investment Total
a
Sum of the last four quarters.
Note: A positive value indicates net outflow of equity abroad (including on the basis Note: Transactions refer to the change in debt excl. cross-currency changes and
of the growth in international reserves). other adjustments. Data for the first quarter of 2020 refer to January and February.
Source: CNB. Source: CNB.
Figure 59 Financial account flows by equity to debt ratio Figure 62 Gross external debt
end of period
5 15 60
as % of GDP
billion EUR
billion EUR
4 12
50
3 9
2 6 40
1 3
0 0 30
–1 –3
20
–2 –6
–3 –9 10
2012 2013 2014 2015 2016 2017 2018 2019
Equity liabilities, net Change in international reservesa 0
Debt liabilities, net excl. reserves Financial derivatives 2013 2014 2015 2016 2017 2018 2019
Total net capital flows excl. reservesa Total net capital flowsb – right
Total net capital flows excl. reserves – right
a,b
General government Croatian National Bank Other MFIs
a
The change in gross international reserves is reported net of foreign liabilities of the Other sectors Direct investment
CNB. b Sum of the last four quarters.
Note: A positive value indicates net outflow of equity abroad. Net flows represent the
difference between the change in assets and the change in liabilities. Note: Data are up to February 2020.
Source: CNB. Source: CNB.16 CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020
Figure 63 General government debt
Table 4 Consolidated central government net borrowing
GFS 2001, in million HRK
100 100 Jan. – Nov. 2018 Jan. – Nov. 2019
share in general government debt, in %
as % of GDP
84.7 84.3
90 81.2 80.8 90 1 Revenue 136,049 145,610
77.8 74.7 73.2
80 70.1 80 2 Disposal of non-financial assets 504 772
70 70
3 Expenditure 126,510 135,487
60 60
4 Acquisition of non-financial assets 3,292 4,290
50 50
40 40 5 Net borrowing (1 + 2 – 3 – 4) 6,751 6,606
30 30 Sources: MoF and CNB calculations.
20 20
10 10
Table 5 General government debt
0 0
in million HRK
2012 2013 2014 2015 2016 2017 2018 12/2019
Jan. 2019 Jan. 2020
Domestic general government debt External general government debt
SGP reference value (60%) – right General government debt – right Change in total debt stock –778 –1,418
Change in domestic debt stock –435 –1,870
Note: Nominal GDP for the last four available quarters was used for the calculation of
the relative indicator. –S
ecurities other than shares, short-term –521 –798
Source: CNB.
– Securities other than shares, long-term 135 –619
– Loans –49 –453
Table 3 Consolidated general government balance
Change in external debt stock –343 453
ESA 2010, in million HRK
–S
ecurities other than shares, short-term 38 0
Jan. –Dec. 2018 Jan. –Dec. 2019
–S
ecurities other than shares, long-term –107 533
Total revenue 178,139 190,097
– Loans –274 –80
Direct taxes 24,776 26,661
Memo item:
Indirect taxes 76,666 81,289
Change in total guarantees issued 14 –178
Social contributions 45,911 47,363
Source: CNB.
Other 30,787 34,783
Total expenditure 177,290 188,543
Social benefits 59,516 62,205
Subsidies 6,132 6,195
Interest 8,870 8,882
Compensation of employees 45,121 47,486
Intermediate consumption 31,175 33,329
Investment 13,477 17,193
Other 12,997 13,254
Net lending (+)/borrowing (–) 850 1,553
Sources: Eurostat and CBS.CNB • INFORMATION ON ECONOMIC TRENDS • MAY 2020 17
Abbreviations and symbols
Abbreviations n.e.c. – not elsewhere classified
OECD – Organisation for Economic Co-Operation and De-
BIS – Bank for International Settlements velopment
bn – billion OG – Official Gazette
b.p. – basis points R – Republic
BOP – balance of payments o/w – of which
c.i.f. – cost, insurance and freight PPI – producer price index
CBRD – Croatian Bank for Reconstruction and Development RTGS – Real-Time Gross Settlement
CBS – Croatian Bureau of Statistics Q – quarterly
CCI – consumer confidence index RR – reserve requirement
CDCC – Central Depository and Clearing Company Inc. SDR – special drawing rights
CDS – credit default swap SITC – Standard International Trade Classification
CEE – Central and Eastern European SGP – Stability and Growth Pact
CEFTA – Central European Free Trade Agreement VAT – value added tax
CEI – consumer expectations index WTO – World Trade Organization
CES – Croatian Employment Service ZMM – Zagreb Money Market
CHIF – Croatian Health Insurance Fund ZSE – Zagreb Stock Exchange
CLVPS – Croatian Large Value Payment System
CM – Croatian Motorways Three-letter currency codes
CNB – Croatian National Bank
CPF – Croatian Privatisation Fund ATS – Austrian schilling
CPI – consumer price index CHF – Swiss franc
CPII – Croatian Pension Insurance Institute CNY – Yuan Renminbi
CR – Croatian Roads DEM – German mark
CSI – consumer sentiment index EUR – euro
DAB – State Agency for Deposit Insurance and Bank Reso- FRF – French franc
lution GBP – pound sterling
dep. – deposit HRK – Croatian kuna
DVP – delivery versus payment ITL – Italian lira
EC – European Commission JPY – Japanese yen
ECB – European Central Bank USD – US dollar
EFTA – European Free Trade Association
EMU – Economic and Monetary Union Two-letter country codes
ESI – economic sentiment index
EU – European Union BG – Bulgaria
excl. – excluding CZ – Czech R.
f/c – foreign currency EE – Estonia
FDI – foreign direct investment HR – Croatia
Fed – Federal Reserve System HU – Hungary
FINA – Financial Agency LV – Latvia
FISIM – financial intermediation services indirectly measured LT – Lithuania
f.o.b. – free on board PL – Poland
GDP – gross domestic product RO – Romania
GVA – gross value added SK – Slovak R.
HANFA – Croatian Financial Services Supervisory Agency SI – Slovenia
HICP – harmonised index of consumer prices
ILO – International Labour Organization Symbols
IMF – International Monetary Fund
incl. – including – – no entry
IPO – initial public offering .... – data not available
m – million 0 – value is less than 0.5 of the unit of measure being
MIGs – main industrial groupings used
MM – monthly maturity ∅ – average
MoF – Ministry of Finance a, b, c,... – indicates a note beneath the table and figure
NCA – National Classification of Activities * – corrected data
NCB – national central bank () – incomplete or insufficiently verified data
NCS – National Clearing SystemYou can also read
