CNB Council: Continuing positive economic trends

Published: 8/2/2017

At its meeting today, the Croatian National Bank Council reviewed a report on recent monetary and economic developments and a report on banking operations in the first nine months of 2016. The CNB Council also adopted several decisions within its area of responsibility.

Positive economic trends continued in late 2016, including a strong growth in industrial production and goods exports, an increase in the retail trade turnover and a slowdown in the decrease in construction activity. Continuing the upward trend, the annual rate of change in consumer prices turned positive in December. All the main CPI components, with the exception of industrial products, contributed to the increase in inflation, with the largest contribution coming from the prices of food, including beverages and tobacco, and the prices of energy. The CNB continued to pursue an expansionary monetary policy, creating substantial amounts of reserve money through foreign exchange purchases from banks and thus pushing free reserves in credit institutions' accounts to record high levels. Monetary developments in 2016 were marked by an increase in lending to domestic sectors compared to that in the previous several years, which was primarily driven by a continued recovery in placements to the corporate sector and to some extent in placements to the household sector, growing for the first time since the seven-year deleveraging period. The available data for the second half of 2016 suggest continued positive fiscal developments, indicating that the annual general government deficit could be much lower than in the same period in the previous year. General government debt was lower at the end of October 2016 than at the end of 2015, mainly due to a positive exchange rate effect.

The CNB Council also examined the latest central bank's analysis of financial stability, which is to be issued as a regular quarterly publication under the title Macroprudential Diagnostics. The analysis points to systemic vulnerabilities and risks that can jeopardise the stability of the financial system and explains macroprudential activities and measures introduced by the central bank. The total exposure of the system to systemic risks in the last quarter of 2016 is assessed as medium, that is, as unchanged from the assessment made in July 2016.

In addition, the CNB Council approved the reappointment of Ivo Bilić as Chairman and of Emir Deldago as Member of the Management Board of KentBank d.d., Zagreb, proposed by the Bank's Supervisory Board, as well as the appointment of Csaba Soós as Member of the Management Board of Sberbank d.d., Zagreb.