The total volume of household loans issued in Croatia increased by 3.5 percent in May 2018 compared to the same month in 2017 to 121 billion kuna (€16.4 billion), their highest level since January 2016, Raiffeisenbank Austria (RBA) said on Tuesday.

The year-on-year growth rate of 3.5 percent is the highest on record since 2011, when data collection began, indicating a gradual recovery of loan activity, RBA said in an analysis of data recently released by the central bank.

The currency structure of loans shows that Croatians are increasingly shifting from loans denominated in foreign currencies to those in the local currency kuna, in part due to a drop in interest rates.

The proportion of kuna loans in total household loans had increased by six percentage points in the same period, bringing the ratio of kuna to foreign currency loans in April and May to 50 percent.

The volume of kuna loans continued to increase, both monthly and annually, exceeding 61 billion kuna (€8.2 billion) in value. The month-on-month increase was 1.7 percent, and the year-on-year was 16 percent.

The nominal amount of foreign currency-indexed loans slid by 6.9 percent from May 2017 to 60.1 billion kuna.

Mortgages accounted for the largest proportion of household loans (43 percent), increasing by 2 percent to 52.6 billion kuna.

Albeit modest, the positive annual growth rates continued for the sixth month in a row, while the growth pick-up was observed in the last four months, RBA said.

At the end of May, mortgages reached 14.7 billion kuna (€2 billion), up 25.8 percent over the same month in 2017. The share of kuna-indexed loans in the total value of mortgages increased by 5.3 percentage points to 28 percent. At the same time, the share of kuna loans pegged to a foreign currency, mostly to the euro, dropped from 77.3 percent to 72 percent or 37.8 billion kuna (€5.1 billion).

General-purpose cash loans, which accounted for 37.4 percent of the total household loans, reached 45 billion kuna (€6.1 billion), an increase of 9.5 percent compared to May 2017. In this category too the share of kuna-indexed loans increased to reach 70 percent of the total general-purpose cash loans.

(€1 = 7.38 kuna)

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