As Poslovni Dnevnik/Ana Blaskovic writes, this year, specifically from February onwards, a strong growth in lending has been noticeable, and after a long period of stagnation (or in some cases decline), Croatia has once again entered a period in which loans being granted to companies outnumber those being given to households, the Croatian Association of Banks pointed out in its HUB Pregledi publication.
They noted that the annual loan growth back during the month of May this year actually exceeded the double-digit threshold for the first time and has since continued its upward trajectory.
“According to the latest data for the month of July, when the amount of net loans exceeded 100 billion kuna for the first time in eight entire years, growth stood at 16.1 percent. Along with Ireland and Romania, Croatia is among the three EU member states with the fastest growth in loans provided to companies in July,” they stated from the Association of Banks.
Some assessments consider it unfounded that behind the generous lending of companies there is only the motivation to finance old loans while there is still a period of historically low money prices ahead of the announced tightening of monetary policy.
“It’s well known that the European Central Bank started increasing interest rates back in July 2022, which will continue with the aim of suppressing inflation, but bearing in mind the expected increase in interest rates in the next year, it’s only logical that some companies are trying to contract more favourable financing conditions in the long term. However, it is a question of net credit growth, i.e. an increase in credit activity on top of usual refinancing,” they pointed out, adding that more active loan support is correlated with economic growth, which stood at an encouraging seven percent in the first quarter and accelerated to 7.7 percent in the second.
During this year, companies operating in Croatia primarily wanted to get their hands on business loans. In July, their growth reached as much as 21.5 percent on an annual basis. Loans for investments also grew at a double-digit rate, 12 percent, while other loans to companies increased by 6.1 percent.
From the Croatian National Bank (CNB), as was written back at the beginning of this summer, they see part of the reason for the unprecedented corporate demand in the increased needs of companies operating in the energy sector due to the huge explosion of costs. In July, loan demand was led by large companies in Croatia with 20.4 percent growth. They were followed by micro companies with 15.3 percent, medium-sized companies with 8.8 percent and small enterprises with 7.4 percent. Regarding loans for investments, the order is similar; the fastest growth was recorded in the large ones by 27.1 percent, and in the smallest ones by 15.2 percent.
“As such, Croatia has once again entered a period in which loans to companies grow faster than loans to households do. Such a relationship for a period of more than four months was last recorded back in 2016,” HUB notec.
In addition to the economy, household lending also grew, albeit more slowly, by 5.2 percent during the month of July. The Association of Banks added that lending to the economy exceeds inflation, but the same is not true for people and household loans. The rate of increase in household loans in Croatia still remains below inflation, as does the growth of nominal wages (7.5 percent in July), resulting in the continuation of the decline in (real) indebtedness of that segment. At the same time, housing loans are growing at a rate of 9.4 percent, and cash loans are growing at a rate of 2.8 percent.
“This means that the contribution of loans to the financing of current consumption is minimal. Moreover, credit card loans are on the decline, and overdrafts on current accounts and other loans to households, although they recorded growth during this year, are at lower levels than the average for the period from 2018 to 2020,” HUB stated. They also added that the different rate of growth of deposits and loans should be weighed up since deposits have been strongly accelerating since 2020 with expectations of a continuation of the trend after the tourist season and ahead of the conversion to the euro on the first day of 2023.
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