CNB Council: Favourable economic trends continue

Published: 4/2/2016

At its session held on Wednesday, chaired by the Deputy Governor of the Croatian National Bank, Relja Martić, and attended by the Minister of Finance, Zdravko Marić, and the Chairman of the Parliamentary Finance and Central Budget Committee, Goran Marić – the CNB Council examined the latest economic and monetary developments, a financial system stability analysis and a report on the banking system operation in the third quarter of the previous year. The Council also adopted several decisions within its field of responsibility.

Following a strong economic upturn in the third quarter of 2015, favourable trends continued at the end of the year. Industrial production and retail trade increased relatively strongly and a downturn in construction stopped. These developments had a positive impact on the labour market, evident in continued employment growth and declining unemployment. December saw a slowdown in annual consumer price growth, reflecting mainly a lower negative contribution of energy prices. The CNB's monetary policy stance remained expansionary in late 2015 and early 2016. The requirement to allocate the foreign exchange component of reserve requirement with the CNB was abolished, which provided banks with more flexibility in managing these funds. Monetary developments continued to be marked by corporate and household deleveraging. As regards public finances, an increase in general government revenues, coupled with stagnating expenditures, led to a marked annual decrease in the deficit in the first nine months of 2015.

As emphasised in the discussion of the system's financial stability, risks to Croatia's financial stability would decrease should favourable conditions in international financial markets continue. However, it was also pointed out that the main vulnerabilities persisted, including a slow economic recovery, the fast growth and high level of public debt, a high exposure of domestic sectors to interest rate shifts and the resulting high sovereign risk premium.

The Financial Agency was authorised to operate the EuroNCS payment system and granted approval for its Operating rules. The EuroNCS is the payment system for the execution of national and cross-border payments in euro in accordance with the rules of the Single Euro Payments Area (SEPA) Scheme, which is soon to start operation.

CNB Council members approved the decisions of supervisory boards of three banks to extend the mandates of these credit institutions' management board members. Miro Dodić will remain Chairman of the Management Board of Istarska kreditna banka Umag d.d., Umag; Boris Zadro will remain Chairman and Nataša Jakić Felić Member of the Management Board of Kreditna banka Zagreb d.d., Zagreb, whereas Mario Henjak is to remain Chairman of the Management Board of Sberbanka d.d., Zagreb.