Information on economic trends - May 2020

 
 
Information on
economic trends
           May 2020
CNB • 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 System
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