September 7, 2022 – Croatia is among the three EU member states (the other two being the Republic of Ireland and Romania) with the fastest growing business lending.
As Poslovni Dnevnik/Ana Blaskovic writes, this year, specifically from February, a strong growth in loans has been noticeable, and after a long period of stagnation (or in some cases decline), Croatia is once again entered a period when loans granted to companies are more numerous than those granted to households, underlined the Croatian Association of Banks in its publication HUB Pregledi.
They noted that annual loan growth during May this year actually broke double digits for the first time and has since continued its upward trajectory.
“According to the latest data in July, when the amount of net lending exceeded 100 billion kuna for the first time in eight whole years, the growth amounted to 16.1%. Together with Ireland and Romania, Croatia is among the three EU member states with the fastest growth in lending to businesses in July,” they said from the Banking Association.
Some assessments find it unfounded that behind generous corporate lending there is only the motivation to finance old loans when there is still a period of historically low silver prices before the announced tightening of monetary policy. .
“It is well known that the European Central Bank started raising interest rates in July 2022, which will continue with the aim of suppressing inflation, but given the expected increase in interest rates l Next year, it is logical that some companies will be trying to contract more favorable long-term financing conditions. However, this is net credit growth, that is, an increase lending activity on top of usual refinancing,” they pointed out, adding that more active lending support is correlated with economic growth, which stood at an encouraging 7% in the first quarter. and accelerated to 7.7% in the second.
During this year, companies operating in Croatia were mainly interested in getting their hands on business loans. In July, their growth reached up to 21.5% on an annual basis. Investment loans also grew at a double-digit rate of 12%, while other business loans increased by 6.1%.
From the Croatian National Bank (CNB), as it was written at the beginning of this summer, they see part of the reason for the unprecedented business demand in the increased needs of companies operating in the energy sector due of the enormous cost explosion. In July, demand for loans was dominated by large companies in Croatia with growth of 20.4%. They were followed by micro enterprises with 15.3%, medium enterprises with 8.8% and small enterprises with 7.4%. For investment loans, the order is similar; the fastest growth was recorded in the larger ones by 27.1% and in the smaller ones by 15.2%.
“Thus, Croatia has again entered a period where loans to businesses are growing faster than loans to households. Such a relationship over a period of more than four months was last recorded in 2016,” notes the HUB.
Adding to the economy, household loans also increased, albeit more slowly, by 5.2% during the month of July. The Banking Association added that lending to the economy is outpacing inflation, but the same is not true for lending to individuals and households. The rate of increase in loans to households in Croatia is still below inflation, as is the growth in nominal wages (7.5% in July), leading to a further decline in the (real) indebtedness of this segment. At the same time, housing loans are increasing at a rate of 9.4% and cash loans at a rate of 2.8%.
“This means that the contribution of loans to the financing of current consumption is minimal. In addition, credit card loans are down, and overdrafts on current accounts and other loans to households, although they have recorded an increase during this year, are at lower levels than the average for the period from 2018 to 2020,” HUB said. They also added that the different rates of deposit and loan growth should be weighed as deposits accelerate strongly since 2020 with expectations of a continuation of the trend after the tourist season and before the conversion to the euro on the first day of 2023.
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