Household savings in Croatia has been on the steady increase for the past two years, reflecting the regained confidence in the domestic banking system, which was undermined in end nineties due to difficulties in several banks. Consolidation and competition strengthening within the banking system have certainly contributed to the improvement in confidence.

At the end of September, the overall household savings in Croatia amounted to 53.7 billion kuna, which is 21.3 percent more than at the end of the previous year, or a 29.4 percent increase compared to the same period in 2000. Household savings accounts for 80 percent total deposits and represents the most important source of financing of bank loans.

This year's high growth rate of savings continues the 2000 trend when household savings growth rate was 23.3 percent. Although growth rates of household savings over the past two years have been below the rates in the mid-nineties, when they exceeded 50 percent, it should be noted that the increased base contributes to a lower growth rate. Savings thus increased by 8.4 billion kuna in the previous year, whereas it grew by 9.5 billion kuna in only nine months of this year.

The majority of household savings in Croatia is in foreign currency - at end September foreign exchange household savings accounted for as much as 92.9 percent of the total household savings. The so called euro currencies predominated, with the share of over 80 percent in total foreign exchange savings, while the German mark alone accounted for 69 percent of the total foreign exchange deposits. The US dollar and the Swiss franc had 17 percent and 3 percent share, respectively, in total foreign exchange household deposits. The forthcoming introduction of the euro has not significantly changed the structure of the foreign exchange savings, which indicates the household confidence in the new European currency.

Maturity structure of savings deposits also reflects the household confidence in domestic banks: at end September, term deposits accounted for 70 percent of total savings, whereas demand deposits accounted for 30 percent.

An additional accelerated growth in savings is expected at the end of the year, as a result of placing cash in foreign exchange accounts with commercial banks prior to the introduction of the euro banknotes and coins in 12 EU countries. It is estimated that Croatian citizens hold a significant amount of foreign exchange cash, primarily in the euro currencies. It can be expected that the majority of that money will be placed with domestic banks, which will additionally increase savings. Cash inflow into banks has already started, and it should become more intensive in the following few months.