CNB Council: New monetary projection adopted

Published: 18/4/2014

At its session today, the Council of the Croatian National Bank examined recent monetary and economic developments and adopted a Monetary policy projection for the period between 2014 and 2016.

The period of very good liquidity of the domestic financial system continued into the first months of this year, this being reflected in the low level of overnight interest rates: in March, the weighted interest rate in direct interbank trading stood at 0.51%. At the same time, yields on kuna and foreign currency-indexed T-bills decreased. In January and February, the banks' lending and deposit interest rates were somewhat lower from December 2013. Influenced by amendments to the Consumer Credit Act, interest rates on household loans fell, irrespective of their currency structure and maturity. Exchange rate effects excluded, the total bank placements remained unchanged in February with household and public enterprises placements decreasing and placements to private corporations increasing slightly, with their total combined growth since the beginning of the year amounting to HRK 1.3bn. Household placements continued to decrease on an annual level as well (1.4%), while total placements to corporations increased relative to the year before (1.0%).

At the end of January, the gross external debt stood at EUR 45.9bn, an increase of 0.2bn from the end of December. This was mainly attributed to the short-term borrowing of banks. Other domestic sectors, in particular the Croatian Bank for Reconstruction and Development and public enterprises, also increased their foreign liabilities (including debt to affiliated enterprises). Contrary to that, other non-banking financial institutions continued to deleverage. Private corporations continued to deleverage as well. The increase in their liabilities to affiliated enterprises was followed by a considerable decrease in liabilities to other creditors. Alongside those changes, the debt growth was also impacted by cross-currency changes, especially in the government sector.

A considerable deceleration of inflation is expected in 2014, in conditions of a stable exchange rate of the kuna against the euro, absence of domestic inflationary pressures both on the demand and on cost side, and a decrease in the prices of imported food products and crude oil, and thus the average annual growth rate of increase in consumer prices could fall from the last year's 2.2% to only 0.2%, and reach 1.1% at the end of the year. Certain acceleration is expected in the following year, but at an average annual rate of 1.7% inflation will remain below its long-term average.

At its session today the CNB Council approved acquisition of more than 50% of the initial capital of Banco Popolare Croatia d.d., Zagreb to OTP banka Hrvatska d.d., Zadar, and it also agreed with the appointment of Zorislav Vidović as Chairman of the Management Board of that bank. In addition, the Council agreed with the appointment of Ivan Vrljić and Marino Rade as Chairman of the Management Board and member of the Management Board of Karlovačka banka d.d. respectively, and it also agreed to extend the term of office to Damir Šprem as Chairman and to appoint Slavica Matić as member of the Management Board of HPB - Stambena štedionica d.d., Zagreb.

On the occasion of the 20th anniversary of adoption of kuna and lipa as monetary units of the Republic of Croatia, several commemorative banknotes and coins will be issued: a 20 kuna banknote identical to the 2012 issue, but with an additional text printed in microtext ''TWENTIETH ANNIVERSARY OF THE CROATIAN CURRENCY KUNA AND LIPA 2014'' at the position of the watermark, a 1 kuna coin marked ''1994-2014'' and a commemorative set of 10 and 20 kuna banknotes with the date of issue 30 May 2014.