The Council of the National Bank of Croatia chaired by Governor Dr. Marko Škreb met on Wednesday, June 4, to review recent economic and financial developments and to consider the adoption of adequate monetary policy measures to be taken in June. The Council also made several decisions acting in accordance with the authority entrusted to the central bank.
Available indicators confirmed that the macroeconomic framework in Croatia remained stable in May, while the economic activity showed further signs of recovery. In May retail and producer prices rose by 0.4 % and 0.2 % respectively, while the cost of living went up by 1.1 %. Compared to May 1996, retail prices were higher by 3.6 %, producer prices by 2.3 % and the cost of living by 4.2 %. The exchange rate of the kuna against the Deutschmark remained stable, while certain minor fluctuations occurred in the exchange rate of the kuna against some other important currencies.
The average net wage paid in the first four months of 1997 was, measured in real terms, 12.7 % higher than a year earlier. Nevertheless, it has been estimated that such an increase is not in significant disagreement with the existing productivity levels, which would otherwise produce proinflationary pressures. Namely, within the real sector, industrial production, trade, construction industry and tourism recorded positive growth rates in the past few months. It was also observed that in April - after a period of continued growth over several successive months - the number of registered unemployed persons decreased. In addition, a noteworthy increase in foreign trade was recorded in the first four months of 1997: compared with the same period last year, exports of goods for processing, investment goods and consumer goods increased by 9.2 %, 14.7 % and 23.9 % respectively, while the value of imports grew even faster, with imports of goods for processing showing an increase of 14.1 %, imports of investment goods rising by 56.3 % and imports of consumer goods by 28.7 %.
In May, the liquidity of the banking system experienced some minor fluctuations which influenced the movement of interest rates in the Money market and made the National Bank of Croatia intervene in the foreign exchange market on several occasions through foreign exchange purchases. Nevertheless, there were no major disturbances in the markets, and it is expected that the lending rates of commercial banks will continue to decrease.
The Council of the National Bank of Croatia decided to reduce the required reserve ratio by 1 percentage point, so that in future it shall amount to 33.85 %. Taking into consideration the overall decrease in interest rates - thus, the average weighted interest rate on kuna deposits with commercial banks amounted to 4.44 % in April - the Council enacted the decision pursuant to which the interest rate paid by the central bank on required reserve balances of commercial banks should be reduced from 5.5 % to 4.5 %.
The Council of the National Bank of Croatia approved the plan related to the issue of commemorative coins for the remainder of 1997, and decided that at the end of June it would issue the commemorative gold and silver "Vukovar" coins, dedicated to the town of Vukovar, which has become a symbol of the fight of Croatian people for freedom, and to all those who defended Vukovar. The commemorative gold coin will be issued in denomination of HRK 500, and the silver coin in denomination of HRK 150. The coins have been designed by Mr. Kažimir Hraste, an academy-trained sculptor. In addition, the Council decided on the issue of the 25 kuna legal tender commemorative "The First Congress of Croatian Esperantists", that has been designed by Mr. Damir Mataušić, an academy-trained sculptor.