Wednesday, 23 June 2021

Total Household Loans Reach HRK 137.5 Bn in April

ZAGREB, 23 June, 2021 - Total household loans in Croatia reached HRK 137.5 billion at the end of April 2021, increasing by HRK 3.6 billion from April 2020, Raiffeisen Bank (RBA) said in its recent analysis of data provided by the Croatian National Bank (HNB).

The annual nominal household loan growth rate was 2.7%, picking up from 1.6% in March 2021.

The share of kuna-denominated loans in total loans was 55%, and the nominal amount of loans was affected by the euro-kuna exchange rate, which was 0.4% lower on an annual level and 0.1% lower on a monthly level.

Compared with December 2020, household credit claims in April 2021 increased by 1% or HRK 1.35 billion as a result of a rise in the nominal value of housing loans and the impact of housing subsidy schemes on them.

Housing loans accounted for 46.4% of total household loans, reaching HRK 63.8 billion, up by 1.61 billion from the end of 2020. The annual growth rate picked up from 8.3% in March to 9% in April.

On the other hand, general-purpose cash loans, despite a slight monthly rise of 0.2% to HRK 52.5 billion, were 1.4% lower than in April 2020, while increasing by 0.5% compared with the end of 2020.

RBA analysts expect that the rise in household loans will continue this year on the back of subsidised housing loans and the need for funding for the reconstruction of housing damaged in last year's earthquakes.

With the easing of COVID-19 restrictions and the acceleration of economic activity, there will be an increase in demand for cash loans, but this year it will be more modest than two-digit growth rates seen between mid-2018 and the outbreak of the coronavirus pandemic, RBA said.

(€1 = HRK 7.5)

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Sunday, 20 June 2021

CNB Removes Certain Croatian Banknotes From Circulation

June the 20th, 2021 - Have you checked your jacket pockets and old wallets lately? If you've got any of these Croatian banknotes lying around, you've only got a certain amount of time to get them exchanged as the Croatian National Banks begin removing them from circulation.

As Poslovni Dnevnik writes, the Croatian National Bank has so far withdrawn seven series of 5, 10, 50, 100 and 200 kuna banknotes, six of which were issued back in 1993 and one two years later. To date, however, 9.5 million such invalid Croatian banknotes, out of a total of more than three hundred million printed, are still in circulation.

The highest number of invalid banknotes (11 percent) in denominations of five kuna each were issued back in 1993. This banknote is primarily green with the image of Petar Zrinski and Fran Frankopan. The nominal value of this most invalid banknote stands at around 17 million kuna, writes Vecernji list.

The CNB pointed out that 750 of these oldest paper Croatian banknotes have been returned to them over the last year, and they have been exchanged for the same value. In the last year alone, the CNB received a total of 17,706 invalid Croatian banknotes, including 3,923 200 kuna banknotes bearing the image of Stjepan Radic.

In the year dominated by the ongoing coronavirus pandemic, many people seemed entirely unaware that you haven't been able to spend some of these notes for as long as ten years now. The value of the old 200 kuna note in the last year stood at as much as 784,600 kuna. The total value of all returned Croatian banknotes exchanged from May 2020 to the end of May this year was around 1.44 million kuna in total!

A year ago, about 2,800 ten kuna banknotes, 1,707 20 kuna banknotes, a little more than five thousand old 50 kuna banknotes and a little more than three thousand old one hundred kuna banknotes were ''dusted off'' and returned.

The Croatian National Bank will replace all invalid kuna banknotes free of charge and without a time limit to anyone who brings them in person to the CNB box office at 5 Franjo Racki in Zagreb, or sends them in by mail.

For more, follow our lifestyle section.

Sunday, 20 June 2021

Croatian National Bank Pumps 900 Million Kuna into System

June the 20th, 2021 - The Croatian National Bank (CNB/HNB) has pumped a huge amount into the system for the second time since this year began as the economic situation globally continues to be rocky.

As Poslovni Dnevnik/Ana Blaskovic writes, for the second time this year, the Croatian National Bank has needed to intervene in the foreign exchange market to correct the exchange rate of the domestic currency (kuna) against the euro.

The central bank bought 120 million euros from commercial banks on Wednesday at an average exchange rate of 7.497346, pumping 900 million kuna back into the Croatian financial system.

Although there were no significant slips to speak of in the market before, the supply of the banking sector slightly pulled the exchange rate from 7,488 down to 7,485, but after a continuous appreciation in the previous month, the Croatian National Bank, as the regulator, decided to intervene and make the move.

While the second intervention this year resulted in the ''printing'' of Croatian kuna, when the previous such intervention took place back in April, the Croatian National Bank made a withdrawal from the system. With the sale of 190 million euros to banks, around 1.44 billion kuna in total was withdrawn, which stabilised the exchange rate back then at the level of 7.570405 kuna.

On Thursday, the middle exchange rate of the euro on the exchange rate list of the Croatian National Bank (which has been applied since Friday) reached 7.484807 kuna. When we last saw these levels, it was mid-August last year at the very peak of the tourist season, which ended very abruptly shortly after when Croatia unfortunately ende up being placed on the red lists of most countries from which the tourists were typically arriving here from.

This year, a better yet still wobbly summer season is expected than last year, and with it the inflow of euros, which will, as every year at that time, push the kuna exchange rate down. It should be noted that by joining the exchange rate mechanism, Croatia undertook to keep the exchange rate in the range of +/- 15 percent around the central parity of 7.53450.

For more, follow our business section.

Saturday, 12 June 2021

One in Three Cities, Municipalities Have Too Few Residents - Večernji List

ZAGREB, 12 June, 2021 - As many as 72% of cities and 76% of municipalities in Croatia have fewer residents than is optimal considering their economic potential and volume of services, the Večernji List daily issue of Saturday says.

This conclusion is the result of a study made by Croatian National Bank (HNB) researchers Antonija Biljan, Milan Deskar Škrbić and HNB deputy governor Sandra Švaljek, focusing on the optimal size of local government units, which is a rare research topic in Croatia.

Zagreb was not included in the analysis due to a number of particularities, and the analysis shows that cities should not have fewer than 15,000 residents (15,139) while the optimal number of residents for a municipality is 3,744. Only one in four cities or municipalities meet that criterion.

The study was published after the recent local election and its authors put forward several recommendations for politicians, suggesting voluntary merging of the smallest local government units or interest-based cooperation between neighbouring municipalities.

There are 556 local government units in Croatia, of which 127 are cities and 428 municipalities. The City of Zagreb has a special status of city and county.

Only 35 cities have more residents than the optimal number, as do 102 municipalities. The budgets of all local government units amount to around HRK 28 billion.

The country's existing territorial organisation is not based on a historical administrative division but is a result of discretionary decisions by policy makers in the early 1990s, the authors of the study say.

Considering the size of territory, population, fiscal capacity, system of financing and functions of local government units, many domestic experts warn that the current territorial structure is inefficient and calls for their merger.

The HNB study focused on population density, demographic structure of local residents, socioeconomic factors such as the amount of taxable income and unemployment rate, as well as transfers from the central government, the daily says.

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Tuesday, 18 May 2021

Croatian Economic Situation Picks Up During First Quarter of 2021

May the 18th, 2021 - The Croatian economic situation has been picking up throughout the duration of 2021's first quarter, as demonstrated by a rapid assessment of GDP done by the central bank.

As Poslovni Dnevnik/Ana Blaskovic writes, the Croatian economic situation accelerated in the first quarter of the year between the two coronavirus pandemic waves, as illustrated by the model of a rapid assessment the country's GDP by the central bank in some new information on economic trends.

Industrial production, from 0.8 percent in the last quarter of last year, accelerated to 4.5 percent thanks to the production of non-durable consumer goods. This is indicative that an upward trend was also observed across other major industrial groups, with the exception of the production of durable consumer goods, which stagnated.

The beginning of this year also brought momentum in the Croatian retail sector (6.6 percent compared to 5.9 percent at the end of the year). The data for February suggests the continuation of growth in construction activities of 3.9 percent on a quarterly basis with an increased volume of work.

With the third wave of the ongoing coronavirus pandemic then striking, the feeling of relief and cautious optimism sank in part, but not equally among everyone, which only further highlights the fact that this crisis continues to affect individual industries and sectors very differently.

Back in April, business expectations in industry improved when compared to the previous, unstable month of March, they stagnated in construction, and they unfortunately deteriorated sharply in trade and services.

One major indicator of the health of the Croatian economic situation is the (admittedly traditionally very seasonal) employment rate. There has been, at least as yet, no major change in the country's employment rate. In the first three months of 2021, the number of Croatian employees was 0.9 percent higher, and only a tenth of those employees were being covered by government measures initially introduced last year to try to preserve jobs. The domestic unemployment rate then rose to 8.5 percent in March 2021.

Monthly inflation rose 1.1 percent in the same month due to seasonal growth in clothing and footwear prices, higher excise duties were placed on tobacco products and oil became more expensive out on the global market. The Croatian National Bank stated that foreign trade also slowed down rather significantly.

After a jump in exports (of 6.2 percent) and imports (of 6.6 percent) in the last quarter of pandemic-dominated 2020, the pace of exports in January fell to 3.2 percent, while imports (mainly of petroleum products) increased by 1.8 percent. Although exports surpassed imports, due to a significantly larger import base, the foreign trade deficit increased by 6.2 percent.

For more on the Croatian economy, follow our dedicated business section.

Friday, 14 May 2021

Croatian Economic Recovery Certain, National Bank Warns of Threats

May the 14th, 2021 - Croatian economic recovery is certain, and with the vaccination rollout across the country and indeed the rest of the world, particularly in Croatia's emitting markets picking up, the situation with the domestic economy is slowly but surely regaining strength. Despite that, the Croatian National Bank (CNB/HNB) has warned of threats.

As Poslovni Dnevnik/Ana Blaskovic writes, Croatian economic recovery has actually been happening at a far more rapid pace than most could have ever predicted just a few months ago, but the financial system remains exposed to significant risks due to strong public debt growth, inflation in terms of property and the risk of what are known as zombie businesses - all of which are the undeserving victims of the pandemic.

The CNB Council warned that fiscal policy, among other measures, contributed to mitigating the effects of the ongoing coronavirus pandemic, and the decline in revenues and generous support for the Croatian economy spilled over into a jump in public debt (with increased interdependence between banks and the state itself). For the time being, the risks of government financing are mitigated by low risk premiums and favourable financing conditions, as well as generous European Union (EU) funds which have been made readily available.

The problem that has been snowballing for some time now is the warming up of the situation in the real estate market. Although they don't explicitly mention inflation, the CNB points out that "high and rapidly rising residential property prices are increasingly being separated from the economic values ​​that should determine them". The number of transactions during the pandemic decreased somewhat, but prices only slightly slowed growth on the wave of cheap money, government subsidies and stable levels of employment and income.

Housing loans have been growing rapidly, and although they're granted with prudent lending conditions, "part of the loan shows increased repayment ratios to income, which in unfavourable circumstances may exacerbate the effects of disturbances in the real estate market."

Finally, with the longer duration of the coronavirus pandemic and fiscal stimulus associated with it, the threat of corporate sector zombification grows. Parts of the economy continue to suffer from anti-epidemic measures, and while premature repeal of some measures can jeopardise healthy enterprises, those companies with unsustainable business models can also actuallt benefit from maintaining them for too long

. "This may reduce corporate dynamism and zombify the corporate sector, with unfavourable implications for Croatian economic recovery, growth and financial stability," the CNB warned.

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Thursday, 22 April 2021

Central Bank Governor Boris Vujčić Says GDP Contracted By 7.8% in H1 2020

ZAGREB, 22 April, 2021 - As a consequence of the coronavirus pandemic and earthquakes real GDP in the first half of 2020 contracted by 7.8% year-on-year, due to a drop in personal consumption, investments and exports, while government spending rose mildly, Croatian National Bank Governor Boris Vujčić said on Thursday.

Vujčić said this in parliament while presenting the Croatian National Bank's (HNB) annual report on the financial situation and price and monetary policy stability in the first half of 2020.

He recalled that in the first half of 2020 a strong contraction of the global economy was recorded due to the spread of coronavirus and the introduction of restrictions. He added that the fall in real GDP in developed countries was the most pronounced during the peak of the spring pandemic wave.

Personal consumption contracted by 6.8% on the year, reflecting a decrease in available income due to negative trends on the labour market, a fall in the consumption of services whose provision of limited due to epidemiological restrictions as well as citizens' being less inclined to spend due to the need for physical distancing to avoid the risk of being infected and a decrease in consumer optimism. Those trends were also reflected in the lower indebtedness of the population, said Vujčić.

The annual inflation rate slowed down from 1.4% in December 2019 to -0.2% in June 2020 under the impact of the decreased prices of oil products, caused by the fall in global demand. The spread of the pandemic led to a decrease in inflationary pressure overall, notably in services related to tourism due to a significant drop in the number of passengers, and in durable consumer goods, due to a drop in investments. Basic inflation slowed down mildly from 1.2% in December 2019 to 1.1% in June 2020, which was mostly due to a drop in annual rates for individual food products and catering and accommodation services.

The contraction of economic activity due to the pandemic resulted in the import of goods falling at a significantly greater rate than exports, and the current and capital accounts in the first half of 2020 recorded a decrease in the deficit compared to the same period in 2019. On the other hand, the current and capital accounts were adversely affected by a significant drop in the net export of services, notably due to the situation in tourism.

HNB promptly adapted its monetary policies, using all the available measures with the aim of preserving the stability of the exchange rate and favourable conditions to finance citizens, the corporate sector and the state, said Vujčić. HNB sold a total of €2.7 billion to banks after which the kuna exchange rate was stabilised, he said.

Thanks to this and other measures kuna liquidity reached record levels and the state and private sector were able to continue taking loans with domestic banks under virtually the same terms as before the crisis, however, the weaker economic activity and demand for loans resulted in stricter terms to approve loans as a result of which consumer lending slowed down.

The budget deficit of HRK 13.2 billion in the first half of 2020 reflects the negative impact of the crisis caused by the pandemic on the economy and budget revenue. Temporary measures designed to relieve the consequences of the pandemic, such as the writing off of tax obligations and job-keeping support measures, also contributed to the fall in revenue. This is particularly obvious in the second quarter, when the deficit amounted to almost HRK 10 billion, HNB's report notes.

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Thursday, 22 April 2021

CNB Confirms: Croatian Salaries Cannot be Paid into Revolut Account

April the 22nd, 2021 - The innovation made in the financial field over the last few years has been quite astounding, and with the power of banks no longer being quite as limiting as it once was, apps like Wise (formerly Transferwise) and of course Revolut are becoming more and more popular. That said, Croatian salaries still cannot be paid into a Revolut account.

As Novac/Karlo Muratagic writes, here in Croatia, it is absolutely not possible to arrange to have Croatian salaries paid into a Revolut account. This is a firm conclusion that can be read from a recent statement from the Croatian National Bank, which after numerous comments came about regarding this issue.

Revolut is present for the central bank in Croatia in two instances, Revolut Payments UAB or as an electronic money institution, and Revolut Bank UAB, as a bank that has a deposit account. In both cases, this isn't enough to be able to compete fully with existing banks in Croatia, but that doesn’t mean they won’t be able to in the future.

The story began almost a year and a half ago. Back in late December 2019, the Tax Administration issued an opinion banning the payment of Croatian salaries to Revolut Payments UAB.

"Given the fact that, according to the CNB, the legal entities that made the inquiry are considered digital electronic money institutions, ie a special type of payment service provider whose establishment and operation is regulated by the Electronic Money Act, we're of the opinion that the payment of Croatian salaries to a kuna account of the digital institution for electronic money isn't considered a payment made into a bank account in accordance with the provisions of the law and regulations,'' stated the Tax Administration.

The stated reason, then, was precisely that it was an electronic money institution. A credit institution from another EU member state may of course establish a branch here in Croatia and through it provide mutually recognised services which it is authorised to provide in its home country. A credit institution from another EU member state may also start providing mutually recognised services in Croatia directly from the day the CNB receives the notification of it doing so.

The Revolut app had apparently ticked that box, but its statement, the CNB stated that they received a notification from Revolut, ie from Lietuvos bankas, on the provision of the carrying out of financial services in Croatia for Revolut Bank UAB. However, this only applies to the receipt of deposits and other repayable funds, while other services listed in Annex I of Directive 2013/36 / EU, which means payment services such as the payment of salaries, aren't included and as such may not be provided in Croatia.

Payment services in this country are defined in Art. 4. of the Law on Payment Operations. The document "Revolut Bank UAB Deposit Terms" stipulates, however, that Revolut Bank UAB is not authorised to provide payment services or issue electronic money. Only the owner of both accounts, through their payment account, ie Revolut Payments UAB, can deposit money to Revolut Bank UAB or withdraw it from the deposit account.

To summarise the above, Revolut did come and is very much in operation here in Croatia, but not to its full extent. Individuals who use Revolut through this app as such have two accounts.

Initially, they are able receive an account for payment in an electronic money institution, ie Revolut Payments UAB. However, as it is an electronic money account, the Tax Administration doesn't allow the payment of Croatian salaries to be made into it. At the moment, Croatian salaries can only be paid only to a current or giro account, and in the Croatian national currency, the kuna.

The second account, which the Revolut user opens later, is a deposit account within the credit institution. It is a new service from Revolut Bank UAB, but this account is not registered as an account for payment services. That is why the CNB stated that Croatian salaries cannot be paid into it in accordance with the law. However, the advantage of this account compared to that of the electronic money institution is that, like all other bank accounts, it is insured.

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Friday, 16 April 2021

The Croatian National Bank (HNB) Reports HRK 266m Profit in 2020

ZAGREB, 16 April, 2021 - The Croatian National Bank (HNB) generated a profit of nearly HRK 266 million in 2020, achieving a positive result for the second consecutive year, but the profit was almost three and a half times lower than in 2019, according to the central bank's audited financial statement released on its webpage.

For the sake of comparison, the HNB had posted a profit of just over HRK 927 million for 2019.

Of last year's profit, HRK 53.2 million was paid into the bank's general reserves and HRK 212.8 into the state budget, in accordance with the Act on the Croatian National Bank.

The financial statement also shows that the HNB last year generated HRKK 591.7 million in net interest income, which is nearly HRK 88 million or 17.4% more than in 2019.

At the same time, net fee and commission income was HRK 34.4 million, or 11% higher, while operating income was HRK 703.3 million, or 48% lower compared with 2019.

The HNB's operating expenses in 2020 reached HRK 419.5 million, or 6% more. In 2020, the HNB had an average of 690 employees, which is 19 more than in 2019, and total employee costs were HRK 203 million.

(€1 = HRK 7.567447)

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Saturday, 10 April 2021

Croatian National Bank Makes First Foreign Exchange Intervention of 2021

April the 10th, 2021 - The Croatian National Bank (HNB/CNB) has made the very first foreign currency exchange market intervention of the year to stabilise the Croatian kuna.

The ongoing coronavirus pandemic has made life very difficult for banks, not in terms of revenue so much but in terms of attempting to stabilise domestic currencies as economic blows keep on being dealt by the spread of the virus and the subsequent introductions of lockdown measures to try to mitigate the escalating public health crisis.

The Croatian National Bank, with Boris Vujcic as its governor, hasn't been immune to the proverbial storm clouds caused by this unprecedented and seemingly unrelenting global situation, and numerous interventions involving the euro and the kuna have taken place over the last pandemic-dominated year.

On Thursday last week, the Croatian National Bank stepped in to make its first foreign currency exchange intervention of 2021.

As Ana Blaskovic/Poslovni Dnevnik writes, to be more precise about what the intervention entailed, the central bank sold 190 million euros to the banks at an average exchange rate of 7.570405 Croatian kuna per euro, as such withdrawing a massive 1.438 billion kuna in total from the system.

This was, as previously stated, the very first foreign exchange intention of 2021, which was done to stabilise the Croatian national currency. The previous intervention by the national bank took place back at the end of March 2020, as the pandemic began to errupt across Europe.

Back then, 618.5 million euros were sold to the banks, and the exchange rate stabilised at 7.608529. In the meantime, four interventions were held in which the Croatian National Bank was the one to purchase the euros.

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