Towards the Conversion of Kuna to Euro: A Significant Influx of Deposit Money is Expected in Commercial Banks

According to the latest data from the central bank, at the end of May, total deposits in commercial banks, which include deposit money as well as savings and term deposits, amounted to 371.5 billion kuna, which is 5.8 billion kuna or 1.6 percent higher compared to the end of 2021. Along with a monthly increase (1.3 percent or 4.9 billion kuna), the annual change recorded an acceleration to 9.9 percent (compared to 9.4 percent in April), as noted in the RBA analysis.

At the end of the observed month, the largest changes were again recorded in deposit money, which reached 157.5 billion kuna, thus accounting for more than 42 percent of total deposits. Compared to the end of last year, deposit money is higher by 4.6 billion kuna, while on an annual basis, double-digit growth rates continued.

Namely, compared to the same month in 2021, the state of deposit money is higher by 22.7 billion kuna or 15.2 percent. Double-digit annual growth rates for this category of deposits have been ongoing since the end of the second quarter of 2013, and are a consequence of high liquidity that has influenced a noticeable decline in passive interest rates of banks, which no longer offer attractive returns.

In such conditions, bank clients mainly direct available funds into deposit money, i.e., funds in current accounts available on demand. As we approach the acceptance of the euro as a single means of payment, it is possible to expect an influx, especially of this type of deposit, into commercial banks towards the end of the year with the aim of converting the Croatian kuna to euro.

Total savings and term deposits with a nominal value of 214.1 billion kuna recorded an increase of 1.9 billion kuna or 0.9 percent compared to the end of April, while compared to the end of 2021, they were higher by 1.2 billion kuna or 0.6 percent. Along with the increase compared to the end of the year, on an annual basis, foreign currency and term deposits were 12.8 billion kuna or 6.3 percent higher than at the end of the same month in 2021. It should be noted that there was a decrease in kuna savings and term deposits, which fell to 3.9 billion kuna (-12 percent annually) in the observed month.